Of all the analysts, you have the short and perhaps medium term direction right. However, it is quite likely that we will get a 7-day reaction on the dollar/yen, on the 7th and 8th, pulling the price back to 108. I would wait as long as until 11th to 13th next week for a cyclical low to buy from. But we have to trade what we see and not what we think. Indicators remain high at this time of writing.

Hello oh wise ones. I had been waiting for quite a while for 109.00 and with RSI (10) topping and prices touching Bol Band (10) upper limites, I sold into the strength but as it worked out not so good. Took 60pt loss but my question is when is it a reasonable risk to go long in such an extended overbought market and when can you take a reasonable risk to sell the strength e.g 109.95??? All advise would be appreciated.

since yesterday's close was above 109.50, i think we're heading to 111 before we start going down for recorrection.

any opinions out there?

Looks like the USDJPY is taking a breather before the next leg up. The $5 billion dollar loss by AIG has sparked some concerns, but the pair is holding steady which could lead to another move higher. Look for next week's U.S. retail sales to be a possible catalyst as early forecasts are calling for a 0.2% increase.

This is a common struggle for even experienced traders. Even if you get direction correct, your trade needs to be structured correctly so that you can survive the 'whipsaw' effects on the short-term.

I am a cautious trade; so IMO, a reasonable place to go with a possible upside trend in USDJPY was on the initial breakout (because there is a good probability that such a clear level can find momentum on the ultimate breach) and then I would wait until there is a pull back to a reasonable technical level. Former resistance at 108.50 could be new support. There may be a better fib or moving average that you could follow; but just be consistent in what you follow and test what works with your trading style.

As a principle, I don't often try to trade trend reversals (tops and bottoms occur infrequently yet most traders try to make it 90% of their business). If you do want to trade it as a false break or reversal, I would take a small position near the top and then build it to full size when it breaks support and confirms its turn.

Well, wouldn't you try to find the bargain? If everyone seems to be suffering, it makes sense that the currency with the best potential for returns (the US dollar just turned off a recent record low on a trade weighted basis) is the one that everyone would buy.

I should have seen this coming, to be sure. The recession is rippling now into a second wave -- attention is now on the other two major economies, Europe and Japan. Tipped the cart, so the speak.

I am wondering if the carrytrade is longer term looking at a decline in interest if interest rates are going go flat or even decline some. What do you think?

Actually, I'm going to put the carry trade article together tomorrow. You can check it out on DailyFX. I did an update to some of the figures today though and it doesn't look good (mostly because interest rate differential expectations).

Just for interest, USDJPY has made 604 pips in the 22 calendar days to August 7. It doesn't normally exceed that amplitude in a cycle. For example, May 25 to June 16, the initial upswing sub-cycles to the second larger cycle ended July 16, actually made 575 pips.

From this point, John, I would therefore be looking for shorting opportunities if they occur. The third subcycle of a third cycle within a set, commencing Aug-13 in this case, rarely makes a higher price than the second subcycle, so the top can be in now.

In general the carry has taken a hit over the past week. In fact, everywhere in the yen crosses, the pairs are plunging - except for one pair. The USDJPY has risen modestly over the past 24-hours on the virtue of the dollar's breakout alone.

So, on the one hand you have a very broad, 200-point plus drop in all the major yen crosses. This is a big push against the carry. Then, we have the balancing effect of the surge in the dollar. Whichever holds out the longest, we will have our USDJPY direction.

On a side note, look at USDCHF. The franc's association to the carry trade seems to have faded almost completely.

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Since USD/JPY has broken the 110 barrier, anyone betting on a EUR/JPY reversal @ 164.50? Any chances for a bounce back to 169 range?

Thank for any input

I would think that the USDJPY would be more likely to follow the EURJPY on the basis that the carry trade has broken down. (check out the report I put out on DailyFX)

On the other hand, next week we have a very disappointing Japanese GDP report expected to come across the wires (recessionary type stuff), which could put the EURJPY back up. But that is due later.

I have a lot more faith in USD/JPY upside than for EUR/JPY. In fact, the USD has been the only major to gain against the JPY over the past 5 days (see the attached Bloomberg chart). USD may be the strongest currency right now, but it looks like JPY is right up there in second place.

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I'm hoping that the major support will hold @ 164.50. The dip to 163.62 was met with a reverse bounce to 165.60.

Im getting quite emotional with this pair

Net Long @ 166.20

No emotions xxljmzlxx! Easier said than done...but just make sure you try to stick with your initial parameters (stops and limits).