Created on August 20, 2026

The US dollar fell after the US Treasury market announced they are issuing more debt in the long end of the curve.

USD/JPY

The US dollar has fallen pretty significantly against the yen, about twice what it has during most of the sessions over the last week or so, as the US Treasury Department has stated that it is basically doubling the nominal amount of debt in the long end of the curve next month. And with that being said, there are a lot of questions about whether or not it’s quantitative easing. Rates drop by about 9 basis points at one point, and that does drive down the value of the US dollar.

But the question then becomes, why are they doing that? Is it liquidity measures? If it’s liquidity measures, where are the problems? And therein lies the bigger problem. The market reacted as you would expect initially, but it has bounced a bit. And I also point out that stock markets have kind of been all over the place, because they’re trying to figure out what to do.

If there is, in fact, a bigger issue out there, then eventually the US dollar becomes a popular currency to own. Whether or not it’ll be against the Japanese yen remains to be seen, because there is, despite the fact there was a little bit of a pullback during the day, an uptrend here, and a major interest rate differential. The dips continue to find buyers, and we’re kind of seeing that late in the session. We’ll see what the Americans do with it, as I watch the 200-day EMA.

I’ve been long for several months. There’s nothing on this chart that tells me I should get out of my position. Now, whether or not I would add might be a different conversation, at least at this point.

Key Technical Levels and Carry Trade Dynamics

Over the longer term, we will have a lot of questions. The first one will be the technical analysis level of 160 yen. 160 yen sits just below the 50-day EMA, and it appears to be a bit of a barrier regardless. It’s also worth noting that the yen is slipping a bit against multiple other currencies, despite the fact that the yen strengthened everywhere initially. We are seeing, for example, the Australian dollar turn things around against it.

So, what we might have is a continuation, but it might be painfully slow here. And then, it just becomes the carry trade again. So it’s almost like a circle at this point.

If we break down below somewhere around 156 yen, then I’d probably exit my longer-term position and then just walk away, looking for another bounce. Longer term, the interest rate differential will still be a problem. If the Federal Reserve doesn’t start cutting rapidly, then that won’t change.

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Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions

As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire