Carry Trade – Annual Review
In this update, we take a closer look at the evolving dynamics of the carry trade following the December close, where several important signals began to align. We break down the technical patterns driving the most recent move, assess the shifting balance of risk and reward, and map the scenarios that could define the next phase. With cross-market forces starting to interact more visibly, the path ahead may prove more consequential than it first appears.
CANDLES
The carry trade remains healthy following the annual close. The 12-month candle printed a largely neutral structure but did so with solid support at the 100-year MA. The quarterly confirmed a bottom and remains comfortably above the 200-quarter MA. Smaller frames are predominantly bullish, with strong trend alignment. Technicals continue to support USD strength versus JPY. Despite recent softness in the Dollar elsewhere, it is still advancing against the Yen toward levels not seen since 1986. The trend remains bullish until signaled otherwise.
ELLIOTT WAVES
The long-term targets for the USD/JPY pair remain intact.
The long-term targets for the USD/JPY pair remain intact. There is a chance of a minor pullback, potentially extending wave 4 in a horizontal fashion, but the odds for such a move appear rather limited.
Summary
The carry trade closed the year in solid technical health. Very long-term frames remain supportive, with the annual structure holding firm on major moving-average support and the quarterly confirming a completed bottom. Momentum across the curve continues to favor the trade, and the broader structure remains intact. While the Dollar has shown intermittent softness elsewhere, USD strength versus JPY has persisted, driving the pair toward levels not seen since the mid-1980s. From a structural standpoint, nothing meaningful has been damaged.
In the shorter and medium horizons, trends remain well aligned and predominantly bullish. A minor pullback—potentially a horizontal extension of wave 4—cannot be ruled out, but the odds for such a move appear limited at this stage. Until the technicals and candlesticks signal otherwise, the carry trade remains firmly in control. As the saying goes, trends tend to persist longer than most expect—and for now, this one is still doing its job.
Happy Trading!
