By: Christopher Lewis
USD/JPY has been a highly manipulated market lately, and the Bank of Japan has even gone so far as to admit that it had been clandestinely intervening in the recent past. Although they didn’t necessarily say where – the 76.50 level seems to be an obvious candidate for intervention levels.
Because of this, it makes sense that we have seen Yen weakness lately. Part of it will have been some kind of bullishness in general due to potential agreements in the European Union, but in general, it seems that the world’s markets have been “happier” lately, and the Yen has been sold as a result.
The US dollar has been falling against almost every other currency in the world since the Federal Reserve announced that it was extending ultra low interest rates until the end of 2014, with the exception of the Yen. This shows that the “risk on” trade is favored at the moment, but the overall trend in this pair is decidedly bearish. Because of this, it is actually more difficult to buy this pair then sell it.
Upcoming Resistance
The 78.50 level should see resistance coming back into the market, and will actually start to show its intentions as low as the 78 handle. The pair has been bearish for ages – as long ago as 1989 if you are willing to look at the big picture, and I find it hard to think that anything will have changed in this latest intervention. However, I do also recognize that there is a certain amount of support that will be found – so I am very picky about where I will sell this pair.
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On signs of resistance holding at the above mentioned 78.50 level – I am happy to sell this pair for a short-term trade, aiming down to the 76.50 level. (Or just above it.) If we manage to break above the 78.50 level, we will run towards the ultimate resistance area – the 80 handle. It is there that I might be a little more aggressive with my selling. If that area were to give way – this just became a buy and hold pair. Until then – I am selling, but at those selected areas only.