The Yen Reversal Isn't Over Yet

Investors are turning bullish on the Japanese yen for the first time in years. But their bullishness is a setup for short-term troubles... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [DailyWealth] The Yen Reversal Isn't Over Yet By Brett Eversole --------------------------------------------------------------- This summer, the Japanese yen went from being an often forgotten currency to making front-page news. In a few short days, the so-called "yen-carry trade" blew up. You see, hedge funds had been borrowing in yen for years to buy U.S. stocks. These hedge funds were able to juice their returns because the yen was cheap after a long downturn. But in August, the yen soared in value... And it shook the global financial system for a moment. Things soon calmed down – even though the yen continued to rise. But in recent months, the trend has changed. After a burst of bullish sentiment, the yen rally has stalled. It's falling again. And we likely won't see that reverse until this extreme sentiment turns over. --------------------------------------------------------------- Recommended Links: ['You Only Get This Opportunity Once Every 20 or 30 Years']( One of the most important (and least understood) charts in finance flipped from red to green. Two of America's most respected financial analysts just went "LIVE" to explain what is happening – in plain English – [and what you should do immediately](. --------------------------------------------------------------- [By Midnight Tonight, Log In to Marc Chaikin's $5,000 'Stealth' Website]( This website can spot potential buying sprees on 5,000 stocks – before they occur – for the chance to double your portfolio in 12 months. It was developed by a Wall Street legend whose Nvidia recommendation would have made you 32,000% if you'd held on. His former clients paid up to $60,000 a year to access his system's findings, but until MIDNIGHT TONIGHT, [you can claim a free year of access through a historic offer](. --------------------------------------------------------------- Currencies should be boring. If your local currency is moving fast in either direction, it's not doing its job as a stable source of value. That has been a big problem for the yen. The currency has absolutely crashed in recent years – falling 36% from the 2021 high through the low this summer. It quickly rallied 15% in the wake of the yen-carry explosion. But that reversal also caused a massive rise in bets in the futures market. We can see it clearly by looking at the Commitment of Traders ("COT") report for the yen... This weekly report shows us what futures traders are doing with their money. And when these folks all agree on an outcome, the opposite tends to occur. The COT report was at its lowest reading ever before the recent blowup. But afterward, it soared to a multiyear high. Take a look... Futures traders hated the yen. But then, the currency soared... And traders swung from extremely bearish to extremely bullish. This isn't a good sign for a sustained yen rally. We've only seen sentiment this bullish a few times over the past 15 years. And in each case, the yen lost value in the following weeks. Take a look... Futures traders loved the yen in 2012... just before a multiyear decline for the currency. It happened again in 2016... just as the currency began a multimonth slide. Finally, the COT reading was hugely bullish in 2021... and the yen went on to collapse over the next three years. I don't expect we'll see a major long-term decline in value this time around. That's because we just finished one of those major declines earlier this year. Instead, we'll likely see a minor pullback to skim off the bullish sentiment. That has already begun to play out. The yen has dropped nearly 10% since the September high. The fall will likely continue until sentiment reverses. The yen isn't grabbing headlines anymore. But we're still seeing the fallout from the yen-carry trade unwinding. And while the long-term trend is likely higher, we should expect a lower yen over the short term. Good investing, Brett Eversole Further Reading "Today's setup is a major sentiment reversal after an extreme low," Brett writes. For the first time in years, futures traders are believing in this metal again. And similar reversals in the COT have led to both quick rallies and long-term booms... [Read more here](. Investor demand in a different foreign market is skyrocketing right now. Historically, U.S. investors have been scared of owning these stocks. But with this market already rising, this rally is set up to last... [Learn more here](. --------------------------------------------------------------- [Tell us what you think of this content]( [We value our subscribers' feedback. To help us improve your experience, we'd like to ask you a couple brief questions.]( [Click here to rate this e-mail]( You have received this e-mail as part of your subscription to DailyWealth. If you no longer want to receive e-mails from DailyWealth [click here](. Published by Stansberry Research. You're receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. For questions about your account or to speak with customer service, call 888-261-2693 (U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Or e-mail info@stansberryresearch.com. Please note: The law prohibits us from giving personalized financial advice. © 2024 Stansberry Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Stansberry Research, 1125 N Charles St, Baltimore, MD 21201 or [stansberryresearch.com](. Any brokers mentioned constitute a partial list of available brokers and is for your information only. Stansberry Research does not recommend or endorse any brokers, dealers, or investment advisors. Stansberry Research forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Stansberry Research (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.