USD/JPY remains up by about 50% from early-2021 levels and this has been a big factor as to why the US Dollar hasn't sold off more in the past year as President Trump and the Fed have pushed a variety of drivers that have driven the Dollar down aggressively against the Euro, British Pound and Canadian Dollar.
When asked in late January what President Trump thought of the USD weakness, he said, 'it's great.' And in previous media engagements he's had quotes as to why he wants to see a weaker Dollar, to largely get the benefit and impact that economies like China or Japan have had from a weak currency helping to boost exports.
But because the Japanese Yen has been even weaker - with the BoJ holding relatively low rates even as the rest of the world has lifted - the pair remains well above values that were considered 'normal' only five years ago.
This can change quickly, of course, but there could also be collateral damage, such as we saw back in July of 2024. The brief glimpse of the initial stages of carry unwind also showed what happens when a massive driver of global leverage gets taken out of the financial system, and that led to US equities getting hit aggressively - and the VIX index flaring up to its third-highest reading ever. That lasted until USD/JPY found the 140.00 handle, at which point the carry trade - with trend-side drive towards the high-yielder - simply came back with aggression.
At this point we've seen glimpses of carry unwind like the episode in late-January. And then in February, after the initial bounce from that sell-off, we saw a couple of curious drivers as the pair sold-off after a Sanae Takaichi win - a factor that many widely assumed to be a bullish USD/JPY (and bearish JPY) driver - and then a strong NFP report in the US merely drove a bounce up to a lower high with sellers ultimately returning to hold 154.45.
At this point the pair remains critical to larger USD trends and it's sitting in the middle of a key zone that was resistance in October, support in December and more recently both as support and resistance, from 154.45-155.00.
For USD-strength to prevail as looked at in the last post I think we'll need to see USD/JPY bulls gain acceptance above 155.00. If not, and if we see USD/JPY drift lower, I think there's a more attractive setup for USD-weakness in EUR/USD. - js
When asked in late January what President Trump thought of the USD weakness, he said, 'it's great.' And in previous media engagements he's had quotes as to why he wants to see a weaker Dollar, to largely get the benefit and impact that economies like China or Japan have had from a weak currency helping to boost exports.
But because the Japanese Yen has been even weaker - with the BoJ holding relatively low rates even as the rest of the world has lifted - the pair remains well above values that were considered 'normal' only five years ago.
This can change quickly, of course, but there could also be collateral damage, such as we saw back in July of 2024. The brief glimpse of the initial stages of carry unwind also showed what happens when a massive driver of global leverage gets taken out of the financial system, and that led to US equities getting hit aggressively - and the VIX index flaring up to its third-highest reading ever. That lasted until USD/JPY found the 140.00 handle, at which point the carry trade - with trend-side drive towards the high-yielder - simply came back with aggression.
At this point we've seen glimpses of carry unwind like the episode in late-January. And then in February, after the initial bounce from that sell-off, we saw a couple of curious drivers as the pair sold-off after a Sanae Takaichi win - a factor that many widely assumed to be a bullish USD/JPY (and bearish JPY) driver - and then a strong NFP report in the US merely drove a bounce up to a lower high with sellers ultimately returning to hold 154.45.
At this point the pair remains critical to larger USD trends and it's sitting in the middle of a key zone that was resistance in October, support in December and more recently both as support and resistance, from 154.45-155.00.
For USD-strength to prevail as looked at in the last post I think we'll need to see USD/JPY bulls gain acceptance above 155.00. If not, and if we see USD/JPY drift lower, I think there's a more attractive setup for USD-weakness in EUR/USD. - js
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.