Of all the major currencies, the Japanese yen probably has the worst fundamentals. The Japanese government is amassing debt with both hands and they already are deeper in debt than any other major currency – and by a very large margin. If there ever was a bug in search of a windshield it would have to be the yen.
So what does the brilliant mind of the FOREX markets do last week – following a week of extreme volatility and a yen dropping more than 5 cents against the US dollar? Elementary, my dear Watson, they dropped the yen another 6 ½ cents against the US dollar!
Okay, I will be the first to admit that the US dollar is not a paragon of strength right now. Our government is doing just about the same thing that the Japanese government is doing. That is, spending much more than it takes in each year – and simply printing the money to cover its deficit. But the Japanese are outpacing us and have a built up a substantial lead.
From where I sit, the US dollar and the Japanese yen are in a race to the bottom – and each one seems determined to beat the other in getting there.
I can’t stop the Japanese from debasing their yen – and I sure as hell can’t stop the US from debasing the dollar. And of course neither can you. We are just spectators at the track watching the race.
However, we can still make our $2.00 bets! FOREX provides us the means of betting on the race.
And I am betting that the USDJPY is going to go up from here – quickly and a long way. What the market has been dong to this pair is insane – temporary insanity. Temporary insanity entered the mainstream vocabulary quite a few years ago when it became a legal defense for murder.
Personally, I did not like it then – and I don’t like it now. But I will be watching the USDJPY pair very closely. The pair is at 113.245 right now. I firmly believe it will be back above 120 in the near term – and probably nearer 150 by the end of this year.
But there will likely be a lot of volatility between now and then.
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