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For a short term trade idea, the USDJPY looks poised to test the upper end of the recent range near 119.00 as suggested by the triple bottom at 118.22/26. A break above the 119.00 level exposes Fibo resistance at the 78.6% of 119.84-117.60 at 119.36.
Regarding the bigger picture and the potential unwinding of the carry trade: It is important to understand why the carry trade is being implemeted in the first place. Notice that over the last 5 years, stock markets have gone up, gold and silver have gone up, yen crosses (carry trade) have gone up. Everything is moving together as liquidity expands and contracts. The carry trade is just a tool that is being used by investors to express their willingness to take on risk. No one event is going to change the bullish mood of investors. The carry trade will continue until the universal optimism that we are experiencing now dissipates.
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