The yen should soon display signs of weakness

The fiscal half year end promptly stopped yen strength in its tracks

As we move into the last quarter of the year there seems to be a slowing in the Dollar’s weakness and I’ll hazard a call suggesting it has already found a low. That’s not only against the yen but against the European currencies also.

The general signs of a modest improvement in economic conditions have continued over the past few weeks. Statements from the IMF have become more bullish declaring that the global economy has begun to expand, led by Asia. They point to an improvement in financial conditions in the market in general but warned that the pace of the recovery is expected to be slow.

Economic releases continue to be somewhat volatile but within the industrialized nations the U.S. is still leading the way out of the doldrums while European data still remains weighed down by higher unemployment while industrial numbers remain stable, but more with a soft edge.

This is normal. The US tends to be 6-12 months ahead in economic cycles and the market still looks for better numbers to take the dollar higher.

Even Japan’s numbers have shown a turn for the better. The Q3 numbers showed a modest improvement in manufacturing conditions, unemployment dropped by 0.3% to 5.5% and household spending has turned higher, reflected in much better retail sales numbers. However, there is still a long way to go before Japan can be competitive with the yen at relatively high levels.

I left you suggesting that the Dollar would see its low around the end of the month and so it was. I have been eyeing the Dollar cycles which are finding a low right now. While there is the small chance that it could still dip against the Europeans, if seen it will be brief and looking at the year end horizon I am looking for a higher dollar in general, not only against the yen but against the Europeans also.

As for the yen versus the Europeans there may still be some risk of minor gains by the Yen, but in general I don’t expect any excessive move and actually feel that before long we’ll see the yen begin to weaken against the Europeans also.

Ian Copsey
www.fx-forecaster.com

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Hi. I’m wondering if Ian’s blogs shouldn’t come with a warning seeing as his predictions and forecasts seem to be more often wrong than right. Well, I know we can't get it right all the time but perhaps it's time for a short break and re-working of the models.

I’ve whizzed through the last 6 months of blogs and this is what I found.

On May 18th Ian was a dollar bear and wrote “If I am right and the next move is lower and below today’s 94.54 low then the trend will continue…and by early June back to…the 87.00 area.” The next move was lower to 94.23 but then the direct opposite of the prediction happened, the dollar rallied to 98.30 by early June.

On June 29th when the dollar was around 96, Ian changed to dollar bull and wrote “Thus the Dollar should begin to rise by next week at the latest and should accelerate into the end of the year.” The market did the opposite and within 2 weeks the dollar had weakened to 92 and was to be seen as low as 88 by October.

On July 13th the rate was 93 and Ian wrote “For the coming week this should see the yen strengthen in general and against the dollar to around the 90.00-90.50” In fact, from that day the yen weakened for 3 weeks all the way to 97.6 on Aug 7th.

Also on July 13th Ian wrote “September is where I see some greater directional moves developing – and that is a stronger dollar.” In fact, in September the dollar got crushed. In a later blog, after the dollar had been weak for many weeks, Ian changed September to October during which the dollar did and is rallying.

On Aug 10th Ian wrote “So for now the current pro-dollar sentiment is likely to persist…it looks as if we may just remain in range trading conditions for a while longer”. In fact, Aug 10th was the start of 2 month period of dollar weakness all the way from 97 to 88 by mid October.

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