• 7 hours Cannabis Sales Are Soaring In The United States
  • 1 day Biden Will Be A Boon For Solar Stocks
  • 2 days The Shroom Boom Is Here To Stay
  • 5 days The Gold Rally Has Finally Run Out Of Steam
  • 5 days Citibank Analyst Predicts $300k Bitcoin By End Of 2021
  • 8 days Bitcoin Lives Up To Its Safe Haven Status In A Big Way
  • 8 days 14 Million People Will Lose Unemployment Benefits On December 31st
  • 10 days Why 12 Million American Millionaires Isn’t Good News
  • 11 days Big Oil Is Paying The Price For Investing In Renewables
  • 12 days The Banking Industry’s $35 Billion Gravy Train Could Disappear
  • 13 days Did Amazon Just Democratize Prescription Drugs?
  • 15 days The Private Space Race Just Got Very Real
  • 16 days Short Sellers Are Willing Big In This Turbulent Market
  • 17 days SpaceX Gets Go-Ahead To Send Humans Into Space
  • 18 days Saudi Arabia Lost $27 Billion In Oil Crash
  • 19 days China’s Big Tech Takes A Hit As Regulators Crack Down
  • 20 days Black Friday Could Be Retailers’ Only Hope
  • 21 days Why You Should Not Dump Your Stay At Home Stocks Just Yet
  • 22 days The Real Reason Why Uber And Lyft Stocks Have Soared Nearly 50%
  • 24 days Bitcoin Heads Towards $16,000 And No One’s Cashing In
How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

  1. Home
  2. Markets
  3. Other

Old School Currency Parables

Jonah and the whale

And the LORD commanded the fish, and it vomited Jonah onto dry land. - Jonah 2:10


Delivered from the swirling seas of U.S. dollar strength, the euro rose sharply over the past six sessions - roughly up 4.25% through Monday's close. And although it's just a blip on the 11 month downtrend that saw the euro lose nearly one quarter of its value, the winds have shifted for the moment in the currency markets with all the wrath and fury of Old Testament scripture.

A few weeks back, we carried a nautical theme through the story of Jonah (see Here), speculating that the currency markets were poised for significant trend reversals - with a technical set-up in the yen similar to the upside reversal in the summer of 1998. Two weeks ago, the yen was flirting below long-term support as the currency tested the lows from early December. While the subsequent upside move in the yen (~1.25%) has been weaker than its European counterpart, it currently resides above long-term support and is positioned going into the end of the month with similar positive strength and momentum divergences - with the lows from last December.

Yen and Nikkei Monthly Chart
Larger Image

1998 Yen Daily Chart
Larger Image

Yen 2008 versus 2015 Chart
Larger Image

Considering our long-term read of the dollar (see Here), the structural and pattern similarities with the yen - circa August 1998, dovetails into a general reflationary thesis that would be driven on the back of broad dollar weakness. As mentioned in the past, the yen has exhibited strong positive correlation with the trends in precious metals over the past four years. At this point, we suspect this relationship would maintain correlation and continue to look for gold and silver to lead the respective reflationary pivot in assets most closely tied to rising inflation expectations.

Yen and Gold Weekly Chart
Larger Image

Over the past few months - where we have expected to see a correlation shift, is between the extreme negative correlation between the yen and the Nikkei. Overall, this longer-term reversal has started to materialize, with the yen treading water over its December low - while the Nikkei has rallied another 10%. Although we suspect it will be sawtoothed moving away from the correlation extreme, we still believe both assets will trend together over time for a spell. Our 1987 Nikkei comparative continues to be an excellent guide towards future expectations in the Nikkei - as it has been over the past year.

Nikkei and Yen Monthly Chart
Larger Image

Nikkei 1980-today Chart
Larger Image

Nikkei 1987-1989 versus 2014-2015 Chart
Larger Image

 

Back to homepage

Leave a comment

Leave a comment