Thread: Discuss USD/JPY, GBP/JPY, and other JPY Pairs

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Thanks a lot and happy trading!

Kate Stewart

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The rapid unwind of carry trades on February 27 is still on the mind of many traders and some of us are concerned that something like that may happen again in the near future. Last February, traders blamed a sell-off in the Chinese stock market for the unexpected unwind of carry trades but no one dares to discuss what will be the trigger for the next unwind.

I would like to challenge the visitors of this forum to come up with possible events that have the potential to trigger a significant unwind of carry trades.

Articles of Interest
How Much Longer Can Carry Trades Last?
http://www.dailyfx.com/story/special...836279143.html

Chances for a Carry Trade Unwind in 2007
http://www.dailyfx.com/story/special...535045623.html

How about the money changers tightening supply to the central bank, which would filter through all banks. This is the history over the years of time.
Causing panic, rising rates, equity markets being consumed in accumulation on such bad news,debt assets being taken for failed payments. Enslavement of their ppl and big fat wallets of the few. Surely these few control the supply in which control the economies of the world.

Or maybe just being swallowed by the earth in disasterous natural events.


I could be just paranoid LOL

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.

Jamie, couldnt agree more. yet the shot across the bow in sub prime mortgages i think has placed a scare. I dont think the carry can disappear very quickly but it leaves to question, Who initiates at these lofty levels, I can understand smart money stepping up at the bargain prices seen Mar 5th. The open intrest is climbing on dips according to the margin traded contracts at least in gbp/jpy that i watch.
Is this not trouble clearly laying the foundations for another perhaps more meaningful deeper correction, to flush out the late longs. The Long Term Investors clearly havent been affected by the last move lower, should they not want to better their accounts if they are still bullish and force the weak holders to liquidate while buying at an even cheaper discount?

i also agree with you...the sub prime mess is likely just the first story of many that will come out of the closet. still, the bullishness that pervades the stock market and the willingness to take on risk is so strong that the sub-prime debacle has been tossed aside. that said, there will be a tipping point (there always is). ultimately, i think that gbpjpy will come down to the lower channel line on this weekly chart. whether the turn will come before 241.49 is impossible to say although the turn should come close to the upper channel line (which was breached slightly in january.

Yes sir, topping is a tough business, will be nervous like a cat in a room filled with rocking chairs.
Yen looks like a classic head and shoulders, which means very little to professional money but they sure respected that channel top, clearly have some perimeters to pay attention to

It has already moved down to 118.47 now....looks like your idea might pan out

Originally Posted by ForexTrader1980

It has already moved down to 118.47 now....looks like your idea might pan out

Alas carry has come back with a vengeance in early EZ trade today. As long as DJIA continues to rise, yen strength will be greatly hampered.

It seems like the carry doesn't have much sway over the markets as of late. High yield currencies have gotten a boost from an RBNZ hike and the low yield JPY sees its overnight rate holding steady after the BoJ's meeting and semi-annual report; yet the next big trend keeps escaping USDJPY. I think it was interesting that policy officials were concerned about the level of the currency and suggested that they may come to the market with the much feared fx intervention.

Does anyone have any idea what the time table for such a round of intervention would be? It's been a while since they last came into the market like that and they usually don't say anything before and during. But they do say something afterwards and such policy in the past has preceeded turns. On the other hand, they may try talking it down again. But we have seen in other cases that concern doesn't translate to much for the stubborn carry traders.

In the interim I think the 119-119.90 range could offer some oppurtunities.

The USDJPY is looking somewhat top-heavy at the moment, with the pair's inability to clear 119.80 leaving short term risks seemingly to the downside. This in and of itself is not compelling evidence for a retrace, but looking at bond yields reveals that the US 10-year vs. 10-year JGB yield spread has shrunken by 4 basis points overnight. This type of price action in bonds typically coincides with a drop in the USDJPY, which has yet to materialize.

Hey bulutkarli

Looking at you charts one can see you are looking for more dollar gains and a possible test to 122. Do you think 122 will break? And what technical setup could deny your bullish scenario in the USD/JPY? A break to 117.50?

Thanks

Nice rally there to selll into

The USD/JPY failed to benefit from the carry trade renaissance that occurred over the last 8 weeks. This happened primarily because interest rate differentials between Japan and the US were shrinking at a pace never seen since 2001. Still in the past 4 week those circumstances have clearly changed. The most recent economic data for the world’s largest economy pushed the interest rate differential again in favor of the USD and we think the greenback could gain 200 pips against the yen over the next 20 days.

Trade suggestion:
Long at 120.00
Target at 122.00
Stop at 118.00