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January 27, 2022

Why You Should Be Shorting The Yen Now

Frank Cabibi

With nearly zero moves towards tightening monetary policy, Japan's currency stands almost no chance against the major pairs like GBP, USD, EUR, CAD and AUD. Here are some reasons and setups behind why shorting the yen could be beneficial in your trading.

High Debt-To-GDP

If you were to look at the amount of accumulated debt in 2020, you would see an extremely high increase in the amount of debt Japan took on paired with their stagnant and somewhat dwindling GDP over the span of a year.

shorting the yen
https://tradingeconomics.com/japan/government-debt-to-gdp

Japan also has a negative growth outlook GDP-wise. We are probably not going to see much improvement in the economy or in the currency in 2022. And even if Japan decides to switch gears at some point this year and tighten policy, the others have already had a head start. Interest rates are incredibly important in the world of forex, and the fact that other countries are taking that initiative before Japan is a big indicator for yen-shorters.

Best Pairs For Shorting The Yen

shorting the yen
GBPJPY could be a promising pair to long if price can break above a falling trend line on the 4H chart. Further resistance lies above around 155.420s should the pair close above this level and break out.
shorting the yen
USDJPY looks very bullish even as it tests resistance on the 1D and 4H charts. It looks like the pair wants to break above this level and test the top of this channel around the 116-116.900s.
CADJPY looks somewhat bullish on the 1D chart as the pair is stuck between support and resistance levels. The 50 and 200 DMAs lies below the price which suggest a bullish trend bias for the pair. If CJ can close above the 91.159 mark, we could see a further move higher to the 92.200s.

For more forex analysis on other pairs, click here.

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