The US dollar continues to see buyers every time it dips against the Japanese yen, defying central banks.
USD/JPY
The US dollar fell against the Japanese yen early on Friday yet again, in a pattern that we have seen repeated every day of the week. The initial reaction in Asia and part of Europe is to sell off, but by the time the Americans get on board, the market starts to rally again.
The positive carry continues to be a major benefit here, and I have personally been a long position holder since about 6 months ago. I add on dips, and I know that although the central banks have intervened, there is still an opportunity here if you are patient enough, but perhaps more importantly, size correctly.
Top Regulated Brokers
The sizing will be crucial, and with that being the case, it's very important that you make sure that you are not carrying a position that you cannot handle a 5 handle drop. That being said, though, I get paid at the end of every day to hold on to the carry trade, and right now the carry trade is about the only thing that's working in mass when it comes to the forex market.
Carry Trade Advantage and Key Technical Levels
It's worth noting that we bounced from the 200-day EMA and a trend line, and while I do expect sooner or later the central banks to get irritated again, I don't think we are quite there yet. Quite frankly, they're okay with stable currency movements; it's just when it becomes too much in one direction that they get concerned about it.
That being said, the Japanese have a debt load that makes the Americans look like amateurs, and therefore, they cannot afford to have an expensive yen. In other words, the downside is somewhat limited before it becomes a problem as well. Japan has made this issue for themselves over the last several decades with ultra-loose monetary policy. Now, it looks like the market's trying to punish them for that.
I remain bullish, but I recognize there are going to be serious wiggles at times.
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