Fundamental Forecast for Yen:Neutral
- The Yen put in its largest annual loss after the Bank of Japan made a surprise move to negative rates.
- USD/JPY: Shock and Some Awe (critical resistance zone in 121.50-122 area).
- USD/JPY – Don’t Forget About the 26-Year Trendline.
- Track changes in positioning and sentiment in real-time to filter trends and opportunistic trade ideas.
Confidence is a pretty important thing in a financial system. After all, in a fiat-based monetary system, all that we really have is faith. There’s no gold or silver backing the currency, and while I’m not saying that’s a ‘good’ thing since pretty much all of those regimes have failed, faith is of utter importance because, should trust wane investors may just sell out of your currency at an uncontrollable pace. This could lead to significant currency weakness as investors flock to anywhere but your currency, and all of those goods that you have to import all of the sudden begin to get very, very expensive. This is one of the reasons that negative rate-regimes have been avoided for so long: It could be potentially playing with fire (the inflationary kind). And this inflation isn’t of the ‘healthy’ variety. Just ask Russia. This even began to show signs in Canada earlier this week with reports of the Great Cauliflower Crisis; where four simple heads of Cauliflower could buy a full barrel of Oil. But this isn’t about cauliflower; we’re talking about history here.