The carry trade continues to be a significant influence currently in many of the Japanese yen-related pairs, particularly in the USD/JPY market. The US dollar experienced a slight decline against the Japanese yen at the beginning of Thursday’s session; however, recent movements indicate a potential shift towards upward momentum. The carry trade continues to be a significant influence in many Japanese yen-related pairs. Even though the Bank of Japan has recently increased interest rates, the truth is that they are far from tightening monetary policy sufficiently to effect meaningful change.
Given this context, the market is likely to exhibit some volatility; however, if we manage to break above and decisively surpass the 158 yen level, we could see significant upward movement. At that juncture, it seems plausible to target the 160 yen level, a historical point of intervention by the Bank of Japan. Short-term pullbacks are likely to present buying opportunities, in my view, and consequently, the support levels I am monitoring include the 50-day EMA and the 155 yen level.
These areas are likely to maintain significant importance, yet I find it challenging to analyze them further. Should we fall below that threshold, it could lead to significant challenges for the US dollar. In such a scenario, the 152 yen level may emerge as the subsequent target.
Ultimately, despite the Bank of Japan raising interest rates and the Federal Reserve cutting them, there remains a significant gap between the two. Consequently, if one is considering the carry trade, it is essential to anticipate that the US dollar will maintain a degree of resilience against the Japanese yen. Furthermore, the US dollar demonstrates considerable resilience, primarily because the economic indicators emerging from America remain robust. Thus, even if the Federal Reserve decides to implement cuts, such actions can only be executed to a limited extent.