USD/JPY Forecast: Carry Trade Bulls Focus on 160

The US dollar continues to see a lot of back-and-forth motion against the yen, as we are sitting at a major inflection point, and waiting for the jobs report.

USD/JPY

The US dollar continues to see a lot of back-and-forth trading against the Japanese yen as the interest rate differential continues to play out. This carry trade position has been one that I have been involved in for some time now, and we find ourselves hanging around the crucial 50-day EMA, an area that a lot of technical traders will pay a certain amount of attention to.

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The 160 yen level seems to be a bit of a magnet for price as well, but it is worth noting that interest rates in America continue to climb, and that only widens the overall carry trade prospects. With this, the market will continue to be noisy, but it is probably also worth noting that we have the jobs number coming out on Friday, and that tends to be a big mover of this USD/JPY currency pair overall.

50-Day EMA, 160 Level, and Intervention Risks

I do not like the idea of shorting this pair, mainly because I just don't want to own the Japanese yen. The Japanese yen has been beaten up pretty significantly, and with good reason, as the Japanese are essentially stuck with their monetary policy being ultra-loose.

In this environment and the fact that energy inflation continues to be a major problem, it is just difficult for me to see how the Japanese yen continues to find any footing outside of intervention. There are intervention risks here, obviously, as we have seen quite a bit of intervention over the last several months, but at the end of the day, intervention only slows down what is going on in a market. It very rarely turns things around.

The jobs number on Friday will be parsed, and it will be very important to pay attention to, but I also recognize that the overall trend is still the same. It is still bullish for the US dollar and bearish for the Japanese yen. I like buying dips.

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