Two of my favourite forex charts at the moment are the USD/JPY and the EUR/USD, the Dollar has been on an amazing run as of late whilst the Euro and the Yen are both suffering. However the strengthening of the Dollar against the Euro, might be of some benefit to Europe. An increased demand for European exports due to a weak exchange rate can raise inflation and promote growth within the Eurozone.
The Yen is suffering because Abeconomics (the economic recovery plan of Japan's Prime Minister Shinzo Abe) has failed and has plunged Japan into yet another recession, to be honest it was doomed from the start. Japan's economic recovery plan consisted of:
- Monetary policy - more quantitative easing,
- Fiscal policy - new government spending and an increase of the consumption tax.
- Structural reforms.
On the monthly chart for both the EUR/USD and the USD/JPY the prices are trading near potential turning points.
The EUR/USD below is near a 29-month low of about 1.2030, whether it will reach this level soon is very possible, if this level is broken I think it will find a harder test at around 1.1775.
This chart below also shows price looks to be bouncing off a trendline on the monthly EUR/USD chart, with a possible upwards retracement on the way.
The USD/JPY is near a seven and a half year high of around 124.20, like the EUR/USD above the USD/JPY does have the potential to at least test this level if not break it. Could this level be tested before 2015? We will just have to wait and see.
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