Please Elaborate On The AUD/JPY Carry?

Hey Folks,
That AUD/JPY carry is pretty trendy nowadays, or so it seems. I was hoping someone could explain this image from my TOS platform for me. I’m trying to figure out how the carry trade would work if I wanted to park $10k USD. From what it looks like it seems that it shows how much you would have made or loss today. However, looking at the daily chart the AUD/JPY pair may be paying a great amount in interest but the chart is in a downtrend and not looking like a time to get long. Can someone clarify this for me? Thanks in advance!

The carry trade is simply buying a currency with a higher interest rate then the one your shorting against it. This will pay you a small amount of interest at the close of each trading day. It’s a nice little bonus if price is moving in your favor, but that interest will not cover losses should the pair move lower.

Yen is strongest currency YTD in 2016, so a carry trade with the yen is likely going to lose money

That makes sense. Thanks for the clarification. Is there any viable carry trade around at the moment?

If you want to use the carry trade you should look at a longer term picture.

Look at weekly/monthly charts over several years time and spot where it could be wise to enter.

This means though that you might only be able to take that trade after 6 months from now, and if it turns out a loser, it might be another 12 months before you have another good oppurtunitie. The carry trade could work out well, but it takes a long time, and with interest rate differences of today, it is not that great (in my opinion).

any good carry trade would be the biggest intererst difference (at the moment AUDCHF or NZDCHF). You will need to “catch” a market bottem in those pairs. And every trader knows that catching bottems is hard.

Good luck though! :23: