US Dollar vs Japanese Yen Technical Analysis
The U.S. dollar has continued to bounce around the Japanese yen during the trading session on Wednesday. And as the consumer price index numbers came out as anticipated, it’s not a huge surprise that we are just basically hanging around the same area. The question now is whether or not traders will return to the carry trade or if they will start to think about the tightening out of Japan and perhaps the idea that the Federal Reserve loosening monetary policy means that the carry trade is over.
I find it hard to believe that there won’t be any people willing to take advantage of the carry trade because quite frankly, the interest rate is so massive as far as differential is concerned, that it makes no sense not to take advantage of it, assuming that we don’t get further financial shocks. With this being the case, I think you’ve got a situation where traders will look at this through the prism of just simply going back and forth and trying to determine what the next major impulsive move is.
If we can break above the 148.50 yen level on a daily close, then I think traders will start to scale back into the carry trade. On the other hand, if we drop below the 144.33 yen level, then I think this pair starts to fall apart again and perhaps heads towards the 140 yen level. Longer term, and when I say longer term, I mean looking at a few years, I believe the Japanese yen will continue to suffer.
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This article was originally posted on FX Empire
