The US dollar initially fell against the Japanese yen during the trading session here on Wednesday, as we are looking at a situation where traders are watching the Bank of Japan, and the carry trade.
USD/JPY
The US dollar initially fell against the Japanese yen during the trading session here on Wednesday but then turned around to show signs of life as traders continue to see a lot of volatility in this pair, as well as many others.
Ultimately, the carry trade is still very much in play here, and with the Bank of Japan intervening multiple times, we have seen a little bit of suppression of price discovery. But ultimately, this is a market that is trying to get back to the 160 yen level, an area where we have not only seen resistance previously multiple times going in the past, but we also have the 50-day EMA in the same region.
Carry Trade and Key Moving Averages
Short-term pullbacks at this point in time are likely to test the uptrend line that we have been in for some time, with the 200-day EMA sitting just below there to offer support, all things being equal. USD/JPY is a market that I will remain long of. I’ve been long in for months, and I’m actually buying little micro positions on each dip to build my carry trade portfolio.
If we can get above the 160 yen level on a daily close, then I think it opens up the possibility of a challenge of the 162 yen level, an area that I think will remain important from previous action. And then you start to worry about intervention again.
Nonetheless, the carry trade is a very real thing, and the Japanese can only get so tight. The speech at Jackson Hole on Friday from Kevin Warsh could be the next big mover here.
Want to trade our USD/JPY forex analysis and predictions? Here’s a list of forex brokers in Japan to check out.
Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions
As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire
