USD/JPY Weakness Raises Carry Trade Unwind Risks

It has been a bearish week for USD/JPY, even though conditions normally support upside. This suggests positioning may be crowded and starting to unwind, meaning traders could be closing carry trades rather than adding new ones.

After the election win by Sanae Takaichi and her Liberal Democratic Party, markets expected USD/JPY to rise. The pair initially moved higher but quickly reversed. A strong NFP report from the United States also caused a short spike higher, but again, sellers stepped in quickly. This shows price is not following the usual bullish macro signals.

Key resistance was seen near 154.45 and later around 153.67, where sellers entered again. Support is holding near 152.50 for now. Looking ahead, CPI data from the US could decide the next move.

USD/JPY Daily Chart

The bigger picture question is whether this is the start of a carry trade unwind involving the Japanese yen. Support near 151.95 is very important.