Created on October 14, 2026

The USD/JPY pair continues to be one that is following the carry trade, as far as I can see at the moment.

USD/JPY

The U.S. dollar has fallen a bit during the trading session on Tuesday against the Japanese yen, as we have tested the 200-day EMA. Since then, we’ve seen a bit of a bounce from the 200-day EMA, and it looks a lot like a market that is still trying to build pressure to break above the crucial ¥159 level.

The interest rate differential continues to favor the United States

The interest rate differential continues to favor the United States, and probably will for the rest of my life at this rate. What’s interesting is that sources are now saying that the Bank of Japan is very unlikely to raise rates again in October, which makes sense considering that the amount of debt in Japan is egregious.

With that being the case, the interest rate differential continues to see a lot of U.S. dollar-positive behavior. Quite frankly, the Japanese intervene from time to time, but all it does is slow down the move.

If we can break above the ¥159 level, I’ll be looking for ¥160. A breakdown from here, I think, has support at the 200-day EMA and the ¥156.50 level. I’m not looking to short this pair. I like getting paid at the end of every day with the carry, and have been long this market going back to July in one extreme or the other. I got out a couple of months ago for a day or two and then got back in.

That’s kind of where I’m at. I still feel the same way here. I’m still comfortable with the interest rate differential over the longer term, and U.S. rates remain elevated, even though they have slipped a little bit recently.

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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