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Dollar's eastern promise

At the start of 2011, I wrote here about how the US dollar/Japanese yen had been my trade of the year in 2010 - and how I was looking for further opportunities in the current year. A lot has happened since I wrote that, with the terrible earthquake and nuclear crisis in Japan initially sending the yen to a new all-time high against the dollar. So, I thought I ought to revisit what I wrote back then.

Just to recap, the USD/JPY rate closed below its 12-week low in late June 2010, which was a classic sign of a new downtrend developing. I took advantage by placing a fixed-odds 'will be lower than' bet. Every Monday, I opened a fresh position speculating the week's closing price would be lower than whatever the week's opening price was. I planned to keep doing this until the price closed above its 10-week exponential moving average.

This resulted in 13 winning trades and seven losing trades between June and the end of November. Every winner returned more than 100 per cent. I have since been waiting on the sidelines to start trading this rate again, only this time buying dollars and selling yen.

In the last week of March, I finally got the price action I was waiting for: a weekly close above the 12-week high. On Monday 4 April, I placed this fixed-odds trade: 'USD/JPY to finish higher than ¥84.18 in four days' time. I was right and my return was 105 per cent.

I feel there is more to come here. The fundamentals as they appear to me back up the case for a weaker yen. The US economy is gradually turning the corner and so the authorities should shortly end their money-printing campaign, which has driven down the dollar. At the same time, the Japanese are likely to engage in more money-printing as the country tries to rebuild after the nuclear crisis.

I shall be placing this fixed-odds trade every Monday so long as the conditions still warrant. I will only take the bet so long as BetOnMarkets offer me a greater than 100 per cent return potential and I will never stake more than 5 per cent of my trading account in one go.

Jon McFarlane is a full-time trader who also runs www.systemsfortraders.com, the leading site for reviewing trading systems available to the general public. Read his latest review at

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By Jon McFarlane,
13 April 2011

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