USD/JPY will likely retest 115.30 levels

Continuing on the question whether the Yen will continue to rally as people liquidate their carry trades, there were interesting articles on dailyfx.com pointing out that the Yen will likely continue to appreciate. The volatile stock markets will likely cause higher risk aversion and investors will turn not use their low-interest rate debt to fund the riskier investments. This mean less short positions on the Yen but if this is not enough the Bank of Japan will likely continue their plans of raising interest rates. There has long been arguments of the Yen being undervalued as the BOJ occassional would buy USD in order to keep their currency low to help out exporters.

Most importantly is that interest rate differentials are decreasing as opposed to increasing. The US was raising interest rates at a solid pace while the Japan rate was down to zero percent. Now the tides have turned and BOJ is raising rates while the FED starts considering lowering the USD rate. I would use the recent USD/JPY rebound (115,19-116,75) to put in a fresh short position as I think it will test the 115.30 levels again.