Chart Courtesy: Eagle Bay Capital
“When we see a six-month long consilidation coil in the ways that Nikkei and Dollar/Yen have this year, the resolution is typically violent. So yes, I think there’s definitely a big move coming. It’s the direction of that move that gets tricky,” said Parets.
A violent move in USD/JPY is of particular note to ETFs like DXJ and DBJP, which have soared because of their hedged yen component, benefiting not only as Japanese stocks rose but also as the yen weakened.
DXJ has been so successful that WisdomTree introduced the WisdomTree Japan Hedged Small Cap Fund (NasdaqGS: DXJS) in late June and has filed plans for five more DXJ-esque sector ETFs. [WisdomTree Could Introduce DXJ Sector ETFs]
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of DXJ and EFA.