USDJPY Carry Trade Update

Posted on Sa 21 Juli 2007 in Forex • 1 min read

  • Forex
  • Neural Nets tags: [] meta: _aioseop_keywords: USDJPY, Currency Markets, Currencies, Yen, Dollar, Forex, Trading, Investing, Neural Nets, Modeling dsq_thread_id: '181041934' author:

    The 10 Year T-note yield closed at 4.95% on Friday, way below its previous high of 5.31% set on July 6th. Right after the 4th of July holiday, I posted a chart about the USDJPY carry trade. I created the chart after I modeled USDJPY, 10 Yr T-note yield, S&P500, and CRB index data using a Multilayer Preceptron neural net leaner. Later, I analyzed the data again using a Gaussian Regression learner and created a different chart altogether.

    It looks like the action in the currency pair this past week, and the two weeks prior, seem to confirm the Gaussian Regression learner chart. As 10 year T-note yields retreat, so does the USDJPY.

    USDJPY 072007

    Note: 10 year T-note yields began to rise sharply between July 1st and July 6th and marks the last USDJPY high approximately on July 6th. Previously, the last 10 year T-note yield high, of 5.24% on June 12th approximately coincided with the last USDJPY high set on June 15th-ish. The reason why the USDJPY highs sometimes do not coincide exactly with bond yield highs is that the analysis is a multi-variate model and other inputs such as the CRB index and S&P500, can limit exact coincidence.

    Despite this, the model is considered to be valid because of the correctly modeling the relationships between the data and observing the outcomes in the real trading environment.