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Strategies & Market Trends : LET'S PLAY IN THE FOREX..AND NOT GET LOST!
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To: RockyBalboa who wrote (145)6/17/2007 5:17:33 PM
From: RockyBalboa  Read Replies (1) of 247
 
I looked at a longer term chart and both GBP and EUR had impressive breakouts vs the Yen.

Amazing - it took the EUR 2 years time to overcome 140 a level which it first reached in May 2003 from a base of around 116 then oscillated until 2006. But beween May 2006 and this year it rose from 140 to 165 at a dizzying speed.

At the same time, the JPY and USD is already flat between 2002 and 2007. The JPY undid all gains it made during the dollar deflation when it tried a run to Y100 vs the dollar but it failed in early 2004 and 2005.

But till now the inflation (and interest rate) gap persists between Japan and Europe as well as to the US. One has to ask what it takes until this gap reverses. Y at 200? Or will the Yen reverse at all?

There are some hedge funds out which prey on the trend that forwards vs cash prices are statistically biased in currencies with higher interest rates ie, the market is sometimes discounting the currency with the higher rate too much. Because of the nano sized deviations they need super-liquid markets and large positions.

A pure contrarian would possibly buy JPY and trust in the economic power of JPY. At one point it will be seen as cheap given the large positive trade balances and relatively robust earnings of Japanese companies. But I possibly overlook another cheap currency - the Chinese Yuan.
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