Yen/Dollar Cycle: How it Turned Out

By Jake Bernstein

Yen/Dollar Cycle: How it Turned Out

by Jake Bernstein, FSC Board Member

rulesbasedtrader@gmail.com

Written: 26 August 2024

©2024

My last article in the FSC newsletter (July 25, 2024) discussed and illustrated my long-term cycle in the yen/U.S. dollar relationship. I showed the approximate 8.17-cycle (Figure 1 below) and stated that the cycle was bottoming.

My intent was to highlight a market that was, in my view, positioned for a major price move against the U.S. dollar and other currencies. Because we know that cycles in economic data are not perfect or symmetrical, we use other tools to confirm cyclical turns.

We also know that, given the rules of effective and consistent risk management, cyclical market behavior can and should occupy a key role in the management and/or trading of financial assets. This brief but well-illustrated follow-up shows what has transpired since my last article.

Long-Term Cycles Forecast: Yen/Dollar

My long-term forecast in the Japanese yen versus U.S. dollar futures is currently of particular interest, not only pragmatically but academically. Shown below is the approximate 8- to 9-year cyclical pattern (average 8.17-year) in Japanese yen futures versus U.S. dollar exactly as it was shown in the last report.

Although not perfect and not fully symmetrical, the cycle does “pick” the major up and down oscillations. The trend projection is shown on the right. Note that the cycle was obtained by visual examination of the available data; it has not been discovered through the application of any cycle finder program. Yes, the data history is limited, but the cycle accuracy is impressive. (Note, this analysis is not a buy or sell recommendation).

What the Cycle Says Right Now When Combined With Timing

The cycle as discussed in my last article suggested that a low was possible at any time. In my work, I combine timing with cycles to compensate for the inherent imperfection of cycles.

Therefore, as soon as my timing indicators in this market turned positive, I was confident that a major move up in yen vs. dollar forex and futures had started. If the cycle holds true, the next few years should prove to be very bullish for the yen/dollar.

Figure 1: Approximate 8.17-year cycle in Japanese yen futures versus U.S. dollar index futures

(Chart courtesy tradenavigator.com)

Figure 2: A closer look at the approximate 8.17-year cycle in Japanese yen futures versus U.S. dollar index futures

(Chart courtesy tradenavigator.com)

Figure 3: What has happened since my forecast

(Chart courtesy tradenavigator.com)

It's important to note that while historical patterns can provide some guidance, they are not guaranteed to repeat exactly. Market conditions and external factors can always introduce variability, which is why I use timing indicators to confirm timing. Shown below is the expansion/contraction indicator that triggered a cycle low (expansioncontraction.com).

Figure 4: Expansion/contraction indicator with yen ETF

(Chart courtesy wealthcharts.com)

About Jake Bernstein, FSC Board Member

Jake Bernstein has been publishing Jake Bernstein's Weekly Futures Trading Letter since 1972 and trading futures and stocks since 1968. His forecasts and opinions are quoted regularly in the financial press and on financial websites, and he is frequently interviewed on radio and television throughout the U.S. and Canada, including Wall Street Week, CNBC, JagFN.TV, and WebTV.com. In addition to speaking extensively in the U.S., Canada, Europe, and Asia, Bernstein is a consultant for investors, traders, industry, financial institutions, brokerage firms, and commercial firms. Floor traders, professional traders, money managers, and hedgers, both new and experienced, subscribe to his market advisory services. Bernstein is based in California, U.S.