Buy AUDJPY On Dips?

It's very plausible that the RBA (Reserve Bank of Australia) has started the slow process of moving interest rates from emergency levels to normal.

RBA Starts Rate Rises

We'll want to see what happens over the next couple of months in order to confirm this analysis. However, from now on whenever the markets are panicked about the latest downward surprise, it might be time to dip your toes in.

We're staring at the bottom of a long term AUDJPY carry trade cycle.

I know that Japan has made some noise about not wanting a weak dollar -- but you have to look at the size of their debt load before you start to worry about them being willing or able to withstand high interest rates.

The recently touted alternate carry trade, consisting of the AUDUSD, is much more precarious in my opinion. It's great in the short term. However, in the longer term, perhaps a year or more, I think you'll find the greenback starts to get supported by higher interest rates. How else will the USA entice foreign entities to continue to buy and hold debt once the worldwide spate of risk aversion fades?

Personally, I think this is a good time to raise capital and slowly work on getting carry trades protected by an in-profit stop loss. Presumably, over the course of months and years, we should find that 80.00 represents resistance, then perhaps 85.00, 90.00, 95.00 or more. We'll probably have Yen intervention from time to time as well and language designed to scare us out... but if you keep an eye on the fundamentals you can probably view these as opportunities to place more capital into stop loss protected profitable trades.

Also, if I was managing a countries financial reserves I think I'd be looking for currency trading opportunities involving countries that are both economically sound and likely to continue to raise interest rates over the years as inflation gathers steam. The general business cycle is probably not going to disappear this time around either... regardless of all the hyperbole in the mainstream media.