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By HaleStewart December 26, 2013 8:57 am
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USD/JPY Outlook Still Bullish

Given the BOJ's current stance of monetary loosening, any analysis involving the yen is fairly straightforward.  The analysis verses the dollar is that much easier as the Fed has recently announced it will slowly end its quantitative easing program, which is dollar positive.  All that being said, let's take a look at a few basic charts.

Above is a daily chart of the USD/JPY.  On it, we see a three basic trends.  The first is a rally that started in late September/early October 2012 around the 78 level and which lasted until about May 2013 when prices hit 102/103.  Next, we see a triangle consolidation for most of 2013 as traders digested gains and the market took a wait and see attitidue regarding the efficacy and endurance of "Abenomics."  Finally, prices broke through the upper triangle in late November and the high of 103/104 in late December.  All of these moves indicate the basic trade is still for a rising dollar relative to the yen.

Above is a weekly chart that goes back through the 1990s.  The only reason I've included it is to show that current price levels are historically important.  The USD/JPY trade hit the 102/103 level in late 1999 and again in 2004.  The 104/105 level was a bottom in early 2004. 

So, a move through current levels would mean the 106-107 level (the next set of round numbers) was the most likely price target.

Hale Stewart is a former bond broker who has been writing about economics and financial markets since 2006 on the Bonddad Blog.  He is also a tax attorney with a domestic and international practice while also forming and managing captive insurance companies for US companies.   You can follow him on twitter at:@captivelawyer





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