Carry Trade

The massive “yen carry trade” unwind was technically- and sentiment-driven, and could absolutely run further after pausing for a few weeks. EUR/JPY and GBP/JPY are in play.

A confirmed break above the 149.50 barrier on USD/JPY could open the door for a steeper bounce toward the 50% retracement near 152.00 next

The technical bias in USD/JPY will remain to the upside as long as it remains above the 146.00 level.

So far, we have only seen the euro show any signs of strength apart from those where interest rates are lower – JPY, CHF and CNH. The broader US dollar forecast should turn more negative once the equity markets shown signs of stabilisation light of the sharp repricing of US interest rates.

It’s been a wild ride in the Japanese Yen of late as the pair showed the initial stages of a reversal last week, eventually running down to key support at 147.37. Bulls have made a loud statement since that inflection, and this opens the door for a re-test of the 150.00 handle.

A fiat currency is any monetary instrument backed by a national government. Learn how fiat currencies operate and how they compare to other types of money.

A carry trade is a trading strategy that involves borrowing a low-yield currency and investing in a high-yielding asset to exploit the interest rate differential. Carry trades are most common in forex trading with traders borrowing the low interest Japanese yen to buy higher interest currencies. Learn what currency pairs work best and how to execute the strategy yourself in our full guide.

As inflation rises to multi-decade highs, central banks are once again raising interest rates aggressively, suggesting that the carry trade could may be back from the dead.