The USD-JPY on a knife edge

One of my readers from Japan Forum was highlighting the fact that the USD has been strong lately - contrary to my few that it could be heading to Y85. I retain the view, and gave him the following response:

I think its premature to say whether I still believe the USD-JPY is going to Y85. My reasons for weak USD are that I think US Fed will lower fed rate to 1% as before, concerns about an election, weak economic news and also the possibility of a bank failure. Likely JP Morgan or Goldman Sachs based on their derivatives exposure, but who knows. Also if you look at a chart, the USD is at the peak of its long term downtrend, so you might want to hold that thought. I of course expect it to fall. In support of your view, you might want to look for strength in USD over the coming week. We are really on a knife edge.
Basically I dont see USD going to Y85 as any sign of USD worth, just as a speculative possibility. Which is why I recommend AUD, rather than JPY-USD on my blogs. AUD doing very nicely. So maybe its an issue of perspective. If you want to hold USD long term, I do think the USD will rise strongly next year. As I said months ago, the US will eventually have to raise interest rates to become a 'savings' country, so the associated higher interest rates will result in a stronger currency. Just in the short term, I see weakness. So maybe its an issue of time perspective. As a trader my money goes elsewhere.

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Andrew Sheldon www.sheldonthinks.com