By: Christopher Lewis
USD/JPY is one of the most followed pairs by the Forex community at the moment. This is due in large part to the fact that after a massive meltdown over the course of several years, we are finally seeing some signs of life by the bulls in it. Needless to say, the last couple of weeks have been absolutely astounding as the price has risen over 700 pips in a market that had even resisted several Bank of Japan interventions.
The recent break of the massive weekly trend line and the 80 handle was the real breakout. The Bank of Japan is now purchasing more JGBs (Japanese Government Bonds) which essentially is the same thing as flooding the market with Yen. With the overly strong Yen over the course of the last couple of years, Japanese exporters have been losing money hand over fist in many markets. Even the ones that have been profitable as showing some of the weakest gains in years because of the cost of Japanese goods in places like the United States and Europe.
Hammer breaks higher
The hammer that we formed on Monday has been broken to the upside on Tuesday, and this is one of the most obvious and classic of the “bull signals” that you can get. Granted, the pair looks a bit overbought at this point, but when you zoom out to the weekly or monthly charts, this latest move up has simply been a blip on the radar. Because of this, we may not see a massive pullback like one would normally expect. The trend has seen a pause at the 80 to 81 levels, and this could be what we get before a push through the 85 level.
.png "USD/JPY Daily 3/21/12")
I am already long of this pair, and have added yet again on the break of the hammer to the upside. I have a core position, and then have added a couple of bits that were only 10% of the original position to lever up on the way higher. If we get clear of the 85 handle, I will be adding to this position hand over fist. Selling isn’t possible until we get below 80, and in the meantime I am simply adding every time we get a supportive candle on the daily chart.