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End of Carry Trade

  • #1
  • First Post: Edited 1:12am Jul 29, 2007 12:37am | Edited 1:12am
Good day all

If I am right, it's the end of cary trade

What do you think? Is it possible?

Yen is heading 109 then 101.69 by the end of October 2008

Many thanks
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  • #2
  • Jul 29, 2007 12:49am Jul 29, 2007 12:49am
i dont see why all carry trades should end. USD based, yes, but not nzd, aud and others.
100% of traders are losers. Just that some win more than they lose!
  • #3
  • Jul 29, 2007 1:10am Jul 29, 2007 1:10am
Quoting Mr demark
i dont see why all carry trades should end. USD based, yes, but not nzd, aud and others.

any reasons ??? or it's a guessing,

Technical analyses lead to fndementals, If I have seen a break of that trend line, I will wave my hands at Carry traders

Thanks for your reply
  • #4
  • Jul 29, 2007 6:29am Jul 29, 2007 6:29am
As long as the interest rates are favorable the trade will not end, because money always ultimatley flows to where it is treated best. It would have to take interest rate changes to end the carry trades.. It really is that simple.
  • #5
  • Jul 29, 2007 6:45am Jul 29, 2007 6:45am
hey clusterwise

ya i tend to say yes, time to whatch risk aversion but im in doubt on dollar yenits time to whatch each base curency example against danish kroner or euro

revoke
  • #6
  • Jul 29, 2007 7:38am Jul 29, 2007 7:38am
Draw another trend line......somewhere around 115.....that is more important than this one.

And interest rates will ensure this keeps going on. The BoJ seems a little less likely to raise rates at the end of the year.

Truthfully, this could be an opportunity to buy cheap, but I am waiting for some kind of stability. (although Friday was basically an unchanged day. If you look at history, it takes a few days for this to keep rolling.)
  • #7
  • Jul 29, 2007 8:12am Jul 29, 2007 8:12am
If you look at GBP, NZD, and AUD vs the JPY they're all overpriced so to speak versus the JPY. So we could arguably see 1000 pips drop in those pairs and still see it at very high levels. The carry trade will not end not versus the AUD in my opinion, but I can see the NZD really dropping far further due to the interest rate profile changing from active to flat for the forseeable future.
Patience + Humility + Study = Success
  • #8
  • Jul 29, 2007 8:50am Jul 29, 2007 8:50am
Quoting smjones
As long as the interest rates are favorable the trade will not end, because money always ultimatley flows to where it is treated best. It would have to take interest rate changes to end the carry trades.. It really is that simple.
"A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates - which can often be substantial, depending on the amount of leverage the investor chooses to use." - Investopedia

Agree with smjones here. As long as there are differences in interest rates you will have carry trades. If you look at carry trades you will see there is always a "basket", get the ratios of the pairs in the basket correct and you will make money. Not for the scalpers and get rich quick crowd though.

Rather wave for the trend traders that are in the wrong direction. Not that there are anything wrong with following the trend - purely because sometimes you win, sometimes you lose.
  • #9
  • Jul 29, 2007 1:14pm Jul 29, 2007 1:14pm
any way i was again siting a sunday planning upcomming week i was sitting here and watching the Yen and this looks like a dangerous cocktail yen is strong among most currencys any conservative thoughts?


revoke
  • #10
  • Jul 29, 2007 3:57pm Jul 29, 2007 3:57pm
Quoting smjones
As long as the interest rates are favorable the trade will not end, because money always ultimatley flows to where it is treated best. It would have to take interest rate changes to end the carry trades.. It really is that simple.
that's what i'm thinking too, high interest rate differentials = carry trade. It may be over for usd based trades but look at NZD and others, there is still good enough reason for those to continue rallying.

But by the way, if the carry trade is over, what next? where will the easy money come from now?
100% of traders are losers. Just that some win more than they lose!
  • #11
  • Jul 29, 2007 4:00pm Jul 29, 2007 4:00pm
Quoting marejp

Agree with smjones here. As long as there are differences in interest rates you will have carry trades. If you look at carry trades you will see there is always a "basket", get the ratios of the pairs in the basket correct and you will make money.

are you talking about these ratios?

Quoting dailyfx

Protective Stop-Loss


Substantial gains made from interest rate differentials provide undeniable evidence that the carry trade strategy has been very successful over the past few years. Still, this strategy involves significant risks and an adequate protective stop is required. We are using a protective stop-loss equivalent to five times the average true range.


Position Sizing

Our position size varies according to each currency volatility. Generally, the more volatile the currency is, the fewer lots we trade. For example, let's assume you have $10,000 and you are trading 10K lots, you decide to limit your risk per trade to 3% or $300 and the 90 days average true range for the EURUSD is 100 pips. In this case, if you go long EUR/USD you could buy 3 lots, since ($10000 * 3%) divided by (0.0100*10K) = 3 lots. In case the final result is not an integer you should always rounded it down to limit your exposure
100% of traders are losers. Just that some win more than they lose!
  • #12
  • Jul 29, 2007 4:57pm Jul 29, 2007 4:57pm
it ends to re-start anew all over again..
  • #13
  • Jul 29, 2007 5:31pm Jul 29, 2007 5:31pm
I'm definitely long on the carrytrades in the long term.... This is just a normal, healthy correction.

The question, however stays.... Will this be a brief correction, or a major one. I think this week will be very important. But I fear the crosses are still biased to the downside for this week due to the summermonths. I'm seeing some nice setups on the EUR/JPY, especially if we get a 1000 more pips south !
  • #14
  • Jul 29, 2007 8:22pm Jul 29, 2007 8:22pm
when we area analysing the market we use technical analyses. I haven't seen any one here use technical to confess others, It's only a talks of a behaviour have been used to be seen long time ago. I expecting that yen will not hold weeknes any more. I am going to short yen crosess as usdjpy too is leading to a reversal of the trend. when ever we see an uptrend it's going to be a correction then the new down trend will resume. by the way it's going to be a very powerfull down ward directional waves. I will be more happy if i can see some charts here.

many thanks
  • #15
  • Jul 30, 2007 1:10am Jul 30, 2007 1:10am
Point one. Monthlies

Recently witnessed the break to the upside of a long term triangle.

Current drop appears to be heading for a retest of said triangle. If triangle breaks to the downside, then possibility is bearish in medium term, however a break of the rising trendline at around 110 would be needed for confirmation of a long term change in trend.

The chart also shows numerous occasions in the last two years where the cross plummeted far more than what we have witnessed in the last week

Note in particular the giant pin bar in 2006, which (using elliot waves - which I hate to do) turned out to be the low of the three wave retrace of an earlier 5 wave push.

It nevertheless turned out to be just a retrace of the current long term trend.
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quote of the day: . It's like deja-vu all over again
  • #16
  • Edited 1:23am Jul 30, 2007 1:13am | Edited 1:23am
It's true that if the trendline breaks there is more room to the downside, however, on the weeklies a further trendline must be breached in order to confirm a change in the medium term trend. Probably around 115.
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quote of the day: . It's like deja-vu all over again
  • #17
  • Jul 30, 2007 1:19am Jul 30, 2007 1:19am
Also at the weeklies, we have price now entering an incredibly strong area of medium - long term resistance as denoted by the price pivot area shown in blue.

Price has also reached the 38.2 fib of the trend started in March 06.

A confirmed breach of the price pivot would add strength to the case for a medium term reversal, however, I would like it confirmed by a breach of the 50% fib before I had any confidence whatsoever in calling the end of the carry trade.

Especially as the reason for its existence, ie Interest rate differentials, is still very much in evidence and I cannot see the acts of central banks doing enough to significantly close the gap.
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quote of the day: . It's like deja-vu all over again
  • #18
  • Jul 30, 2007 2:12am Jul 30, 2007 2:12am
Thanks Gmak for ur nice analyses

from my side

SELL 119.00 , ADD 120.25 ST= 122.50
TG= 116.50
TG2=109.00
TG3=101.69

there is a possibility of truncation , so when the price reach 109 we will monitor the movement of the price

good luck

Many thanks
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  • #19
  • Jul 30, 2007 4:04am Jul 30, 2007 4:04am
Don't forget the carry trade is not only about interest rates, but about the rate fo return.

Many of the YEN being sold to buy AUD, NZD, GBP and EUR have been invested in assets demoninated in those currencies, so if it appears that there is weakness or volatility in those asset groups then YEN may be repatriated.

It is worth keeping an eye on other investement groups if trading anything based on varry trades.

Personally the recent correction is very small on a long term scale, and I would expect a blow-off top when this eventually ends, which I don't believe we have had yet. GBPJPY may hit 260 before the trend changes with any significance. This is also supported by my definition that market moves are always more rapid when corrections to the main trend occur, similar to what we have experienced in the last few days.

As always, DYOR.

G-Man
  • #20
  • Edited 5:29am Jul 30, 2007 5:11am | Edited 5:29am
Our Trade is active now

USDJPY = 118.40 ( + 60 pips )

We must see a break of 118.00 at 1:00 GMT as a maximum to confirm that correction has been completed { Equality Rule of waves )

Many thanks
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