[DanRath]

Overall we continue to believe that the JPY will likely weaken over the coming months. The view is that the world has been (and is going) through a process of progressing from a financial de-leveraging position to an economic de-leveraging one. As a result it is skeptical of the “normal” market dynamics that we have been used to throughout 2008 and believe that it is quite possibly for financial market relationships to change.

One of the clearer market relationships was that between the JPY and equities. Throughout 2008 stocks fell and the JPY rallied. It was not a safe haven at all, but instead the JPY rallied with the unwinding of the carry trade in a financial de-leveraging environment. Now it appears as though the dynamics are changing with economic de-leveraging dominating and Japan effectively in a depression.

From a market perspective we must not forget that we have already seen the cross JPY markets move in the opposite direction to equities and must not write off the possibility of that re-occurring. Indeed that is what is happening today with equities performing well and EURUJPY and EURUSD trading in the opposite direction.



The channel base in EURJPY comes in above 129 and a breach of that would lead us to think that the correction down here will likely be aggressive and we could test the 55 dma at 124

EURJPY - Daily chart