We, at FxWirePro, do not usually provide such calls, even in the longer term, more so for usually slow moving Yen.
However, this time around, we have strong reason to believe that Yen might rise and rise at least another 2000 pips from here for the following reasons
- Fundamental currents that has been fuelling Yen's rise have not abated. Our biggest concern is China and the main reason for the outlook is that China's debt bubble, which is now almost 280% of GDP is going to burst.
- We expect, emerging market economies, with their own share of bad corporate debt will get bust too.
- There would be sharp increase in number of defaults in 2016, probably highest since financial crisis.
- On the bull front, Bank of Japan (BOJ), won't be easing much going ahead. Current level of easing would be sufficient to boost growth, if not further easing won't either.
- Two central banks - FED and BOJ- that have been fuelling divergence won't be able to take much actions further in 2016 that could fuel it again. So we think, the pace of divergence has peaked. Balance sheet is still diverging but acceleration is dropping.
We recognize, given the level of Yen (118 per Dollar) and strong Dollar, this outlook might seem extended, so we do have a stop loss for it. 126 per Dollar.
However, it might take more than a year for this call to play out, depending on how China crisis would play out but we are quite positive that probability is high for this call to play out. So aim is to buy Yen as low as possible, as close as to the stop loss.
