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Dollar Appreciation Vs. Yen Could Be Win-Win for Both

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Regardless of the reasons for this shift, this development has benefits.

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The US dollar continues its near-term appreciation versus the yen, which could be a reflection of the uptick in US longer-term rates compared with Japan, as well as a perception that the Fed wants or will tolerate more inflation, and hence a steeper yield curve in an attempt to reduce unemployment.

Whatever the reason, the Japanese welcome -- and desperately need -- a lower yen, which means that right now this could be a win-win situation developing between the dollar and yen.

Technically, my near-, intermediate-, and longer-term work argue in favor of a generational bottom in development for the dollar versus the yen (a generational top in the yen), which is why I am bullish on the ProShares UltraShort Yen ETF (YCS).

The USD/YEN chart has followed my firm's bullish near-term technical script relatively closely in the last few days. Let's notice that the price structure has hurdled and sustained above its March-August down trendline (78.90), which confirms that a near-term low at 77.91 occurred on August 1.


Click to enlarge

In addition, sustained strength also will confirm that the combination of the June 1 low at 77.66 with the Aug 1 low at 77.91 represents a potentially significant Double Bottom.

At this juncture, key medium-term resistance resides at 80.10-80.55, which, if hurdled, will trigger very powerful buy signals that will point to a revisit of 2 1/2-year resistance at 84.50-85.50.

Mike Paulenoff is author of MPTrader.com, a real-time diary of his trade alerts and technical analysis on sectors and their leading component stocks.

Twitter: @MPTrader
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No positions in stocks mentioned.
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