A lot has been said about the “carry trade” liquidation that helped contribute to a -12.4% decline in the Nikkei 225 on Monday. There are some that think the unwind is just getting started.
In this video, I take a look at the weekly chart of four JPY pairs – the USDJPY, GBPJPY, EURJPY and AUDJPY – by looking at the weekly charts.
Looking at the weekly charts of each, the moves to the upside since early 2020, have seen huge gains. That is until each peaked in early July. Since then, the prices have tumbled lower, with each reaching or getting close to some key longer term targets before bouncing higher today.
However, what is true technically is that despite the so-called liquidation in the “carry trade”, the lows are still above the 38.2% of the longer term move to the upside (from the 2020 lows).
If the “carry trade unwind” has more to go, that may be what traders are saying – “we haven’t even corrected to the 38.2% of the last moves higher”.
Putting it another way, the BOJ is just starting to tighten and other central banks are looking to take back some of the restrictive policy. So that is fundamentally bearish currencies and bullish the JPY.
The price action and teh technicals will help tell the story.
In this video, I take a look at the pairs and outline targets on the downside that need to be broken to increase the bearish bias. Again, the lows this week found support against technical support and bounced.
I also look at the bounce and the topside resistance targets that will be watched for a stall in the correction and potential resumption of the downside momentum.
If the carry trade unwind is just getting started, traders will need to see the big picture clearer. This video will do the lift for you.
Watch and learn.