Ah yes, my USDJPY carry trade model seems to be correct after all! Luckily, I went long USDJPY last night at 115.63 and the currency is now trading at 116.98. Too bad I sold half when I was +35 pips in profit, now I have to sell at +150 pips. :)
Here’s what I believe happened. The markets all overshot over the last few weeks, the Yen included. Despite this crazy action, the Yen is still yielding 0.5% and the Dollar is still 5.25%. Bottom line, the carry trade will be reestablished and my model exposed a temporary market inefficiency.
Current target: 119 at a 4.62% 10 yr t-note bond yield.
I should really sell this model to a hedge fund, any buyers out there? :)
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