2 January 2024 - Thoughts on the Market

In my last several write-ups, I discussed my view that dollar yen had finally started its long-awaited powerful reversal from its multi-year highs around 151.90. In almost textbook fashion, the dollar staged a sharp, but brief, reversal from 141.50 back to 145.00, before then resuming its downtrend. The dollar closed today at its lowest closing level since July around 141.00, looking like it will continue its overall descent against the yen after another short-lived corrective cycle to work off some oversold conditions.

There are multiple reasons for the yen to start strengthening, and depending on how the fundamentals play out, we might be at the early stages of a staggeringly powerful move. Just three years ago USD/JPY was trading just above 102.00 so it isn’t hard to imagine a much, much lower dollar over the next twelve to eighteen months, potentially retesting or even breaching that level within the next two years. At a minimum, there should still be plenty of room left in this move before we experience a more serious correction. Several obvious targets would be around 137.30 and 127.30, but it is too early to fine-tune the timing.