The Japanese Yen has continued to plummet in value in the forex market, recently hitting a low not seen in twenty-four years. It appears as if the Bank of Japan (BoJ) will not budge on monetary policy as negative interest rates continue to be the norm for the foreseeable future, despite vocal concerns from Japan’s government. As the BoJ’s relentless dovishness continues to set it apart from increasingly hawkish central bank contemporaries, many traders resume shorting the Yen. Let's discuss 3 ways to sell JPY.
How Long Can the BoJ Hold Out?
While much of the developed world is focused on frantically quelling high inflation rates through contractionary monetary policy tools like rate hikes and quantitative tightening, Japan is not. Rather, the BoJ is in the unique situation of perpetually trying to stimulate Japan’s economy to prevent deflation and create growth. Considering that the BoJ has been striving for at least 2% annual inflation for years, and has only just hit 2.6%, the likelihood of an immediate rate hike seems slim. This situation makes JPY a relatively safe currency to bet against from the standpoint of fundamentals, since the BoJ has little incentive to become aggressive.
Three Potential Pairs to Trade
According to the EdgeFinder, A1 Trading’s market scanner that offers supplemental analysis, the three following JPY pairs are potentially the most promising to buy for Yen bears. Considering that the host countries of all three base currencies are dealing with severe inflation threats, and have become significantly more hawkish in response, these fundamentals contrast well with JPY’s. Here are the pairs, along with their respective EdgeFinder ratings:
1) USD/JPY (Earns a 4, or ‘Buy’ Rating)
2) CAD/JPY (Earns a 4, or ‘Buy’ Rating)
3) EUR/JPY (Earns a 3, or ‘Buy’ Rating)
Save time looking for setups with the EdgeFinder's watchlist! In a glance, see the EdgeFinder's current top buys and top sells.
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