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IRA EPSTEIN & COMPANY
223 West Jackson, 7th Floor, Chicago, Illinois
(November 18, 1997) CURRENCIES: JAPANESE YEN–As of the writing of this report, the December Japanese Yen finished the day at 7976, off 11.
In my last market report 11/06/97, I recommended selling the yen as it broke out of a 2-month trading range, which I defined as being between 8462 and 8222. This market has now broken hard to the downside and made a new contract low of 7897.
After making a contract low last Friday, various officials from both Japan and the United States made comments that they hope will stop the downward movement for the time being.
The Japanese Vice Finance Minister, Eisuke Sakakibara said the Asian stock market panic is over. Lawrence Summers the Deputy Treasury Secretary said excessive depreciation of the yen is counter-productive. There were also remarks by Japanese Prime Minister Ryutaro Hashimoto that the government could possibly use public funds to bail out national financial institutions. In addition to these well-timed comments the Japanese stock market has made sharp gains recently, which were attributed to the slowdown in the yen's slide due to some short covering.
However, despite the yen's slide being slowed somewhat, the economic situation still remains very negative. Traders will look to see if the current Japanese stock market gains hold and will keep a close watch on the pressure on other Asian currencies.
I feel the future for the yen is not good. But with all the recent intervention verbiage, I think the yen may trade range bound for a while, possibly between 8100 and 7900.
My trade recommendation for aggressive well-margined traders is to trade this range. Less aggressive traders should stand aside and wait for what I think will be a breakout below the 7900 area and a resumption of the downward trend.
Steven Bickett
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