Carry trades. I know
some folks love them.  I am a trader and
to me when I hear the word “carry trade” all I hear is the word “trade”.  I think far too often traders who enter carry
trades forget about the set up that should accompany a smart, well-executed trade.   The “carry” part of the trade is just gravy to
me, an extra. 

Since trading is about assuming and managing risk. Here is the risk regarding carry trades: The
risk of any carry trade is that currency rates will change and the investor (or
trader) will have to pay back a now more expensive currency with less valuable
currency.  (check out Wikipedia for good examples
of carry trades). Carry trades are more
investing set ups if you ask me…but I am not here to pass judgment, just share
my opinion.

On the subject of carry trades, we have to talk about the
USD/JPY.  The Yen has been in a rather
ugly distribution cycle at the bottom of the recent sell-off.  This sideways cycle found support just above
the “00” of 115. and is currently testing the “00” of 119.  One concept that you will hear again and again
from me is the need to respect the major of “00” and “50”and minor
psychological numbers of “20” and “80”.

The 0.618 Fibonacci is also waiting up this height. The 0.618 is the “golden mean” and probably
the most followed Fibonacci level, along with the 0.500.  That 0.618 is also only four pips from the
119.20. So what is the “20”.  If you
thought “minor psychological number”, good, give yourself a cookie. So not only does the Yen have the 119.00
resistance to deal with – and this will not be an easy level to break up
through between now and Friday’s NFP, but if and when it does, the 119.16 and
119.20 is waiting.  The difference with
the “16” and “20” resistance is that the Yen will have the momentum of breakig
through the “00” behind it as well as being up through the Wave and having the
support of that as well.

So to carry or not to carry? Whatever you decide make sure that the entry is a confirmed trade in and of itself, and
let the carry be icing on the cake.