By: Christopher Lewis
USD/JPY continued to rise in value on Friday as the trading community is quickly changing its tune as far as the Yen is concerned. The pair has been beaten down for so long, it is sometimes difficult to remember that it used to go up sometimes as well as the common falling in price.
The Bank of Japan has sped up its bond buying programs, and is currently flooding the markets with Yen. This move should continue to work against the value of the Japanese currency, and the fact that we just cleared a major hurdle will also invite short covering and speculators to short the Yen as well.
It wasn’t that long ago that all you had to do was short the Yen (in general) to make money trading Forex. It is still early days, but in some ways it is starting to look like this could return to the markets, and especially against the higher yielding currencies. The USD/JPY pair should gain by proxy though, and certainly the Bank of Japan will have no qualms about it either.
80 is overtaken
The overtaking of the 80 handle is a momentous occasion for the bulls. Quite frankly, I suspected to see real weakness once we got to that level, but it really didn’t take that long to break out of the handle, and that was a bit of a surprise I must say. However, the level has given way, and now we have to think about what this could mean.
.jpg "USD/JPY Daily 2/27/12")
The trade that I think will be dominant going forward will be to buy dips, and this will be especially true if the market can stay above 80. Once we break higher, the next massive resistance area is closer to the 85 handle, and as we are much closer to 80 at the moment, I like those odds. I will continue to buy this pair on the shorter time frame dips going forward, and think that perhaps we are starting to see the trend change. It is still early, but this looks quite a bit like the last time we “bottomed” in this pair back in the mid 90s.