Business-Insider

The GBP/JPY experienced a robust bounce up from support today with the rally in the GBP itself and heavy shorting of the JPY. Predictably, I am seeing a lot of buzz about whether the carry trade has bottomed out and likely to profit in the near term. In addition to the bounce in the GBP/JPY, the risk environment also looks promising for a bounce so I can understand why so many traders are interested. However, I would address this question in two ways...

First, the carry was never gone as a strategic concept. Concentrating all your risk in a single pair crossed with the JPY was never a good idea. The losses since 4th quarter of last year on the EUR/JPY or GBP/JPY have been intense but a diversified portfolio has done fine with a small gain.

Second, I don't think that the risk environment has changed substantially enough to justify long positions in JPY crosses yet. This can be handled by not taking positions with concentrated risk but diversifying your portfolio and the carry trade strategy.

To see the video, click here: http://www.pfxglobal.com/index.php?o...123&Itemid=117
__________________

Blogged with Flock