This Sudden Currency Rally Has Room to Run By Brett Eversole
A genuine currency collapse was underway over the past few years. Now, it appears to be over... The Japanese yen dropped by more than a third of its value from the 2021 high through the low last month. That's a massive drop for a major global currency. The crash led to hugely negative sentiment. Traders were all betting the decline would continue. As we wrote in DailyWealth back in May, that meant a reversal was likely on the horizon... Well, now the reversal is here. The yen soared in recent weeks. And according to history, the recent rally is only the beginning... Investors don't usually spend much time thinking about currency fluctuations. But the yen has been under the microscope in recent weeks... In late July, the Bank of Japan hiked interest rates... which helped trigger a global stock market sell-off. It also pushed the Japanese yen into a sudden dramatic rally. You see, major currencies tend to move at a glacial pace. They typically experience big, long-term trends. So watching a currency lose a third of its value in a few years is rare. It's just as rare to see a currency soar in only a few weeks... But that's exactly what has happened in the Japanese yen. The currency finally hit bottom on July 10. Then, it went on to soar 10% as the market madness took over. Take a look... In early July, the yen was at a multidecade low... the lowest level since the 1980s. But in just 17 trading days, the currency jumped an incredible 10%. And it has popped even higher since then. This kind of quick rally is a good sign for the yen. Over the past 40 years, the currency has a history of continuing to soar after similar moves. Take a look... The yen is a slow long-term mover, like most major currencies. It has rallied just 1.3% per year over the past four decades. But you can crush that return if you buy in times like these... Similar setups led to 4.7% gains in six months and 15.5% gains over the next year. That's massive outperformance. Most folks probably don't think a double-digit gain is possible from here. After all, currencies shouldn't rally that much. But remember, the yen staged its recent rally off a multidecade low. It would need to climb 35% just to hit the 2021 high. So a 16% gain is well within reach. Plus, history is firmly on the side of another leg higher. This currency tends to keep rising after a swift double-digit rally. For the first time in a long time, the yen has caught the attention of investors. And the smart bet is that the recent rally will continue. So if you're looking to make a currency bet, the yen is worth considering today. Good investing, Brett Eversole Further Reading Footwear giant Nike recently fell into "oversold" territory. But this doesn't spell doom for the company. According to history, this setup is actually a great contrarian opportunity... Read more here. In June, the Indian stock market fell 6.3% in a single day. It was one of the worst one-day falls on record. But this decline likely won't last. In fact, 21% gains are possible over the next year... Learn more here. |
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