US Dollar vs Yen edges lower as yen carry trade unwinding accelerates

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Us dollar vs yen slides 0.61% today

Highlights

Japanese institutions unwound overseas carry trades and repatriated assets after the Bank of Japan raised its policy rate to 0.25%.
Elevated yen volatility and concerns over US Treasury buybacks and European Central Bank policy added to selling pressure on the yen.
USD/JPY trades below key moving averages, with strong downside momentum and a 71% probability of a move toward ¥151.75 in the next five days.

Carry trade unwinding intensifies as institutions increase asset repatriation

The unwinding of carry trades by Japanese investors increased, following the Bank of Japan's policy rate rise to 0.25% in July 2024. Large institutions, including the Government Pension Investment Fund, shifted assets from overseas back to Japan, increasing selling pressure. Elevated implied volatility in yen pairs and concerns around US Treasury buybacks and European Central Bank policy were also recorded. Ongoing Japanese policy tightening further influenced the asset, though price action has remained under broader selling pressure.

Anton Kharitonov, expert at Traders Union, sees the USD/JPY pair in a vulnerable position as Japanese institutions accelerate the unwinding of carry trades. He highlights fresh repatriation flows and lingering selling pressure, especially as the price trades below all key moving averages. Downside technical momentum remains persistent and sentiment is clearly risk-off, with oversold readings on several indicators. Kharitonov also notes that the Bank of Japan's tightening is far from pricing in any positive shift. "Until support at ¥152.91 is convincingly held, I see little reason for optimism in this pair," he warns.

Viktoras Karapetjanc, expert at Traders Union, believes the structural macro picture for USD/JPY remains resilient despite the recent pressure from Japanese policy tightening. He emphasizes that large-scale repatriation by pension funds brings short-term volatility, but the underlying bullish structure is intact above ¥151.75. Karapetjanc anticipates renewed international demand and potential upside should resistance at ¥153.88 break. "This market offers multiple setups — I expect further growth if global risk sentiment steadies and US yields rebound," he says.

Parshwa Turakhiya, analyst, notes persistent selling pressure on USD/JPY, with technical signals flagging oversold conditions. He sees near-term sideways movement likely within the projected volatility band, but warns that sentiment-driven moves could trigger rapid shifts at support or resistance. Signals from MACD, RSI, and CCI call for nimble trading and attention to intraday flows. "Watch for short-lived rebounds or continuation moves around ¥153.88 and ¥152.91 — quick setups may appear as volatility compresses," he advises.

Downside momentum persists as key moving averages and indicators align

USD/JPY is trading below all key moving averages, with the price at ¥153.44 compared to the MA-20 at ¥157.67, MA-50 at ¥159.39, and MA-200 at ¥158.89. This positions the pair under consistent short-, medium-, and long-term selling pressure, with near-term resistance at ¥153.88 and support at the week low of ¥152.91. The broader alignment between the MA-50 and MA-200 remains bullish and confirms a longer-term trend structure. Momentum indicators, including MACD and ADX, are highlighting persistent downside momentum. The RSI is at 31.08, indicating the pair is close to oversold territory, while the CCI and BBP both signal oversold conditions and sustained seller dominance. The Awesome Oscillator confirms the negative trend. The pair opened nearly flat and fell 0.61% intraday to ¥153.44, remaining close to today’s low, with muted volatility at 0.34%. Intraday indicators show steady pressure since the open with little sign of reversal.

Earlier, analysts noted that USD/JPY remained under sustained bearish pressure, with technical signals indicating the dominance of sellers and limited upside. The ongoing repatriation flows and increased unwinding of yen carry trades following Japan's latest rate hike reinforce the downside risk, making a break below ¥152.91 a key level to watch for further declines.

Source of Data: USD Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

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