Your Twin Bets on the Japanese Yen Hits Record Highs…

The U.S. dollar’s weakness has been good news for your positions in the Japanese Currency Trust (FXY) and the ProShares Ultra Yen (YCL), both of which hit record highs of $109.46 and $28.55, respectively, on Friday. FXY is now up 16.82% since late September, while its leveraged cousin YCL is up 5.99% in just the last two weeks.

As you can see from the chart below, the Japanese yen has broken out to new highs, and is in a solid uptrend. You should feel comfortable in adding to your position at current levels. Remember that YCL is essentially a 2X leveraged version of FXY, so you can pick and choose how best you’d like to play this trend.

The U.S. dollar’s sudden weakness against the euro and other European currencies like the Swedish crown and Swiss franc last week was bad news for your positions in the Direxion Funds, Dollar Bull 2.5x Fund (DXDBX) and Market Vectors Double Short Euro ETN (DRR).

As result, you were stopped out of the Direxion Funds, Dollar Bull 2.5x Fund (DXDBX) for an 8.16% gain. And since the euro sliced through some strong technical support levels against the U.S. dollar on Friday, I recommend that you also sell your position in the Market Vectors Double Short Euro ETN (DRR) to lock in a 6.70% gain.

The only currency that didn’t strengthen against the U.S dollar was the beleaguered British pound sterling. That meant that your short position in Currency Shares British Pound Sterling Trust (FXB) remained broadly flat. A weak British currency also supports your short position in the iShares MSCI United Kingdom Index (EWU).

As you can see in the chart below, the U.S. dollar experienced a similar bout of weakness back in September, just prior to the collapse of global stock markets in October. 

That pull-back proved to be temporary, and you soon re-entered your bullish positions in late September and early October when the dollar’s upward trend was confirmed. We may do the same this time around. But given the uncertainty of current market conditions, it is better to be safe than sorry.

Last week’s Global Bull Market Alert pick, the PowerShares DB Commodity Double Short ETN (DEE), got off to weak start, with the price of oil bouncing strongly in the middle of last week, before settling back around the $45 level. Nevertheless, this was a blip in the context of the strong downward trend in commodity prices, and my bet is that the collapse of global commodities prices has further to go. Again, we’ll be looking to lock in short-term gains around the 15-20% level on this trade, and once the position starts moving in your direction, I’ll be tightening the stops on this position pretty quickly to lock in profits.

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