Yen will go down the hell

Slow or no growth economically for nearly 30 years with a fast aging population and the debt to GPT ratio standing at 250% is not something you will usually relate to a safe haven currency, right? But it is indeed the case when you are talking about the Japanese Yen. Yen has been widely accepted as a safe haven for decades and it does not appear it will end soon. What’s the reason is totally beyond my small brain and I have no interest to debate with anyone on this. My interest from the trading perspective is where Yen will go from here. We have gone through a lot of turmoil in the past year, which has strengthened Yen again and again as the safe haven currency. Yen against US$ has appreciated about 20% over the year and it stands at 105 at the moment. But I think this is very likely going to change.


You see, Japan has virtually no growth with internal consumption; on the contrary, it has been experiencing probably the longest period of deflation, which is almost certainly continuing for many more years. In other words, Japan is a pure export-oriented economy that it must keep in order to survive. But the safe haven status of Yen that becomes stronger and stronger is killing them. They have to do something to soften the Yen and this is what Abe is going to do for sure. The recent overwhelming re-election victory of Abe’s ruling party with a resounding two-thirds majority in the upper house has virtually given Abe all the power to do what he wants to do. Among many ambitions he has, one thing is almost certainly coming from him is to depreciate Yen. Otherwise the Japanese economy will collapse and Abe will not be able to keep his power for long. Abe has tried QEs for many years already without much success. Who knows what he is going to do but he has hinted that he will do something substantial. One possibility we may think of is from his recent meeting with the famous formal Fed chairman, the “helicopter Ben”. Bernanke is notorious for promoting the idea of so-called “Helicopter Money”, that is “Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community.” And indeed he is seriously thinking about this as the last resort of Fed. It seems this may likely what Benrnanke was proposing to Abe to simply print out money and distribute directly to its citizen in order to stimulate its economy. I of course don’t know if this is what Abe will do or something else but I’m convinced that he is going to take some very drastic step to devalue his Yen. It appears the market has already sensed that per the price action of the exchange rate of Yen against US$. If I’m correct, Yen will go down the hell at least in the near term and shorting Yen will likely be very profitable! The simplest way to do so is via the inverse ETF, YCS. As you can see, YCS appears to have touched the bottom a couple of weeks ago and is moving higher now. It is just breaking out its one year downward trend line supported by the positive MACD, which is quite bullish. I think much more to gain for YCS in the next few months.