It looks like the new Japanese Finance Minister has taken the position that he likes a weak yen. The position of the previous Finance Minister Fujii was just the opposite, but a strong yen was not in the cards as the Central Bank increased liquidity and reduced rates to stimulate a tepid economy. Reduced interest rates in Japan has made the yen the prime candidate as the funding currency for the carry trade. Adaptation to the changes seemed to be too much for Minister Fujii, who then resigned for "health reasons."
Can the yen retain the down side momentum and, if so, what do you buy against the yen? The recent revival of the dollar to elevated popularity might be a good reason to look elsewhere for a long side of a yen pair. Yes, the dollar now seems to have the 95 handle as a reasonable goal, but perhaps the long Cad short the yen has more potential. The recent run up in that pair from 85 to 90 has been a dazzling performance, but is there more? (Click charts to enlarge)
Tomorrow morning we'll get the US non farm payroll report, generally a market mover, and the US unemployment rate. Preceding the US numbers by a half hour are the Canadian employment numbers. If this report produces some unexpected volatility and the market sells off to the 88.00 area, take a look at the long side of this pair.
As you can see from the weekly chart, this pair is flirting with a break out above the 90 level. If the market base is calculated from 6/12/2009 to the first week in Jan 2010, this would produce a measured move to well above 100. Granted, this is a weekly chart, but with this much upside potential how do we approach this market if we fail to get the pull back to the 88 handle? Is a close above the 90 level a meaningful breakout? If so a modest long position on a close above the 90 level should be considered.
Disclosure: no equity positions
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