USDJPY - Tracking Progress on the Inverse Head and Shoulders
The confirmed inverse head and shoulders pattern is pointing us to 204 yen per dollar around October 2026.
There may be a retest of the 125 area where the neckline is drawn before continuing past the current resistance at 134. If we get another chance to sell yen at 125, back up the truck.
All of the macro factors are aligned with a weakening yen, as long as the US interest rate remains higher and the BOJ is committed to buying unlimited treasuries at 0%.
Although the US can't keep raising rates forever, the dollar remains in a stronger position than Japan due to lower debt to GDP and higher use internationally as a trusted medium of exchange. Neither country has much space to maneuver as far as raising GDP or raising taxes, so both will continue to handle the situation by diluting the money supply and buying unlimited treasuries. This commits them to print even more in the future until reaching the inevitable death spiral of hyperinflation. Even a CBDC with strict spending controls will only prolong that inevitability. The bet here is that the yen death spirals first, and that's a solid bet.
And yet, Japan still has strong industrial production, excellent domestic infrastructure, and strong domestic and global belief in the value of the currency, so this will be a slower burn than the Turkish Lira, for example.
The 4-year timeframe to get to the 204 target seems about right from a logical standpoint, and the angle of ascent to get October 2026 is the angle from the neckline from the left shoulder to the tip of the head.
In the end, although betting on the dollar against the yen long term is a pretty safe bet, for the decade-long play you'll be better off buying commodities, gold, and Bitcoin.
There may be a retest of the 125 area where the neckline is drawn before continuing past the current resistance at 134. If we get another chance to sell yen at 125, back up the truck.
All of the macro factors are aligned with a weakening yen, as long as the US interest rate remains higher and the BOJ is committed to buying unlimited treasuries at 0%.
Although the US can't keep raising rates forever, the dollar remains in a stronger position than Japan due to lower debt to GDP and higher use internationally as a trusted medium of exchange. Neither country has much space to maneuver as far as raising GDP or raising taxes, so both will continue to handle the situation by diluting the money supply and buying unlimited treasuries. This commits them to print even more in the future until reaching the inevitable death spiral of hyperinflation. Even a CBDC with strict spending controls will only prolong that inevitability. The bet here is that the yen death spirals first, and that's a solid bet.
And yet, Japan still has strong industrial production, excellent domestic infrastructure, and strong domestic and global belief in the value of the currency, so this will be a slower burn than the Turkish Lira, for example.
The 4-year timeframe to get to the 204 target seems about right from a logical standpoint, and the angle of ascent to get October 2026 is the angle from the neckline from the left shoulder to the tip of the head.
In the end, although betting on the dollar against the yen long term is a pretty safe bet, for the decade-long play you'll be better off buying commodities, gold, and Bitcoin.