Many moons ago on February 8, 2000,we printed the chart below of USD/JPY suggesting that 168.05 JPY would be in the cards at some point -- simply basis the lovely Fibonacci rhythm such an extrapolated high would create on the weekly chart. Since that time, very little has happened. USD/JPY has remained somewhat dormant in the 104-110 region, neither abrogating nor offering any confirmation of our view.

Chart constructed using Advanced GET End-of-Day

Yet in the last two days, USD/JPY has started to show some life to the upside, and may finally be coming out of hibernation. As shown on the chart below, the dollar has now cleared the 40-week moving average which is rounding under current prices. The dollar could easily be headed toward the 100-week moving average up at 114.80, a first layer of technical resistance.

Chart constructed using Advanced GET End-of-Day

Fundamentally, the traditional ruling bureaucrats in Japan have slowly been losing both their credibility and their absolute majority. The Japanese are talking increasingly about normalizing their interest rates away from the failed zero-percent policy of recent years. Although it may seem counter-intuitive to have rates in Japan go up while their currency weakens at the same time, this is exactly what this country needs in order to return their economy to more steady footing longer term. Somehow, this is also likely to be what the market delivers.

We'd be long the dollar here with a stop set just below 104 yen.

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Sand Spring Advisors provides information and analysis from sources and using methods it believes reliable, but cannot accept responsibility for any trading losses that may be incurred as a result of our analysis. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, and should always trade at a position size level well within their financial condition. Principals of Sand Spring Advisors may carry positions in securities or futures discussed, but as a matter of policy will always so disclose this if it is the case, and will specifically not trade in any described security or futures for a period 5 business days prior to or subsequent to a commentary being released on a given security or futures.