For more than 30 years the Bank of Japan groped for a monetary policy that would break the country about of its torpor. Finally in April, BOJ president Haruhiko Kuroda got the world's attention by taking actions so extreme the market couldn't help but react. The Yen has collapsed through a huge technical barrier at 100 per dollar and the Nikkei (^N225) is making 5-year highs.
The question for traders is whether this is just another fake out or if the long-awaited Japanese recovery has finally begun.
Louise Yamada, managing director of Louise Yamada Technical Research Advisors, says both the Yen and the Nikkei moves are the real deal.
Today's leap over 100 is huge for the Yen. Yamada and others expected it to take longer for the currency to break through such time-tested resistance. Now that it's happened the Yen is in a spot that should be familar to U.S. investors: the rally is "due for a rest" but the momentum just won't stop.
"It's looks like a legitimate breakout in the Nikkei and clearly a legitimate decline in the currency," Yamada says in the attached video. What's that mean? As Yamada often says "the greater the damage the longer the time it will take to recover." The Nikkei and yen have spent 3 decades marking time and making doubters of the world. Extended or not, rallies that tear through resistance so vigorously seldom reverse immediately.
For now keep your eyes on 100 in the yen. If this yen slide is finally the real deal we may not see the 90s for a long, long time.