Is This The Japan ETF Breakout Everyone Has Been Waiting For?

ETF Trends

The U.S. Dollar has jumped above 100 against the Japanese yen for the first time since September and with USD/JPY up 0.81% on Thursday, this could be the start of a technical breakout for a broad swath of Japan ETFs that so many traders and investors have been anticipating.

Providing some confirmation is Thursday’s action in the db X-trackers MSCI Japan Hedged Equity Fund (DBJP) and the WisdomTree Japan Hedged Equity Fund (DXJ) , the giants of the yen hedged ETF universe. DXJ, this year’s top asset-gathering ETF, is up 1.5% on volume that is 21% above the 90-day trailing average. DBJP is higher by the same amount on volume that is more than triple the three-month average.  [10 ETFs That Doubled in Size]

Today’s move in DXJ could also serve as confirmation the ETF is breaking out of a triangle pattern and the ETF is within striking distance of $50, a level it has not closed above since May.  DBJP’s chart looks similar and it looks like the ETF could fill in a downward gap caused when the yen spiked in May.  DXJ and DBJP are 8.4% and 11.6% below their 52-week highs.

The iShares MSCI Japan ETF (EWJ) , which is not currency hedged, is up 1% today, though it appears unlikely volume in that ETF will meet the daily average. Still, EWJ is poised to close above $12 for the first time since October.

While Thursday’s action in USD/JPY and the aforementioned ETFs can be construed as encouraging, yen bears and Japan equity bulls may not want to get too excited too soon.  A longer-term chart shows the Nikkei 225 was recently rebuffed at a key resistance area and that Japan’s benchmark index has been making a series of lower highs dating back to the early 1990s. [Japan ETFs: An Epic Move Could be Afoot]

The title of best Japan ETF on Thursday goes to the WisdomTree Japan Hedged SmallCap Equity Fund (DXJS) , which is higher by 2.1% on light volume. DXJS, DXJ’s small-cap cousin, debuted in late June and has almost $28.3 million in assets under management.

WisdomTree Japan Hedged Equity Fund

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Tom Lydon’s clients own shares of DXJ.

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