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Did Anyone Notice The USD/JPY? September 3rd 2015 FX Market Analysis

September 03
04:23 2015

I was looking through some longer term charts and I happen to glance at the USD/JPY monthly chart. Why does anyone care about the USD/JPY long term chart. For those who are new to the currency market you probably have not heard much about the carry trade. In fact since 2008, the carry trade has been a thing of the past for the most part. What is the carry trade? Imagine this scenario.

Imagine you go into a Japanese bank and you borrow 100,000 Yen at essentially 0%. You then exchange those Yen into US Dollars and loan it out at 3%. Essentially you are making 3% on your money. When you buy a currency pair you are doing the same thing. If you buy the USD/JPY you essentially own dollars and paid for it is Yen for the sake of this example. Therefore you get to collect the difference between the cost of borrowing Yen vs the gain of owning Dollars. 

The carry trade has been a good mark of risk aversion and risk appetite because people get out of risk assets during an economic downturn. This is why on a very short term basis the USD/JPY responds the most to US data as a general rule of thumb. When people are scared the USD/JPY tanks and so do all other Yen crosses. When things are calm and people trust the economic state the carry trade goes up. How does this all tie together? Interestingly enough the USD/JPY has not so long ago reached the 2008 highs and failed to break them. What does this mean? I’ll let you decide that one:)

USD/JPY Monthly Chart

Continued EUR/USD Weakness

The Euro had one interaction with a level from yesterday that resulted in a long setup near the beginning of the NY Session. As you can see the first 4 hours of the NY Session did bounce some but not even close to enough to be anywhere near a take profit. Overall the trade got stopped out later at break even. One of the risks you have with fighting momentum is negligible bounces and today that was definitely the case. I do still favor the short on the EUR/USD at this time but that is just an opinion. There are a few more aggressive upper manipulation points I have left out of the chart. If your a member make sure to check out the video review as I do walk through those points as well. 

For those of you on the conservative side I feel the deeper retrace would be the safer short I just don’t know if we will get there. Like always any valid setup from a pre-selected manipulation point will result in me taking the trade. This includes a potential long from the lower level if a trade were to setup once it have been reached. If you do take a trade in any pair including the Euro remember the news and ECB press conference tomorrow.

EUR/USD Chart - September 3rd 2015

GBP/USD Remains Range Bound

The Pound really didn’t show much today. So far the Pound is 2 for 2 in the way of news releases that have come out worse than expected. On Tuesday Manufacturing PMI and now today Construction PMI both missed to the downside on the expected number. A miss on today’s news would be a perfect 3 for 3. I’ve included a few charts to illustrate the current trend. This is what confirms to me that all central bankers are liars as less than a month ago they were arguing the ‘data supports a future rate hike sooner than later’. What data was that exactly? Do they track data the same way China does? If so then maybe I can see where they get their completely fabricated optimistic projections.

UK Construction PMI Chart UK Manufacturing PMI Chart UK Services PMI Chart

As far as the charts are concerned it is always a tough call with the first Thursday and Friday of the month coming up due to interest rate decisions and mainly the speeches that follow. Additionally on Friday we have Non-Farm Payroll looming which has for the first time in a year been on a steady decline. Could we see some of the recent USD strength disappear ahead of the news as people lock in profits? I think that could happen, but then I could also make a case for continued downside and in fact already have with the charts above. That is why like most days I will let a valid setup from a pre-selected manipulation point be the actual trigger for a trade and nothing else.

GBP/USD Chart - September 3rd 2015

Forex News For September 3rd 2015

UK Services PMI 4:30 AM Eastern: Be very careful with trying to ride the trend on this news. More often than not this is a news item that is reversed. Don’t get me wrong, this can create a huge spike but even some of the largest deviations never manage to create a move that goes past the first highs or lows created around the time of the spike. This month 57.5 is the expected number and anything over a 1 point deviation +/- from the expected number will create a sizeable spike of 15 pips or larger. 


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  1. Pascal
    Pascal October 08, 09:49

    Hello Sterling

    USD/JPY short is not a carry Trade?!? Why 3%?
    The Diffrent is -0,15%.

    Reply to this comment
    • Sterling Suhr
      Sterling Suhr Author December 07, 14:31

      I was just using that as an example not the actual interest rate. I was also referring to why historically it use to be the carry trade as the example I used was the interest rate difference in years past.


      Reply to this comment

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