By: Christopher Lewis
The USD/JPY pair has undergone a transformation lately. The pair has been in a bearish run for ages, and until recently, people who bought it only experienced losses. This is mainly because of the perceived safety status of the Yen. The Dollar is also a safety currency, but the Japanese Yen was king for the longest time as the largest firms in the world often borrowed in Yen to fund their trading.
The trade recently reversed though. The Bank of Japan has expanded their bond buying program, and this will in turn flood the market with Yen. The rule of supply and demand will cause the Yen to fall over time as a result. In fact, we have seen the Yen fall against almost every other currency around the world.
80 And Moving Forward
The recent breakout over the 80 level is a significant event. This area managed to repel two central bank interventions, yet was broken through in relatively short order. The area had been massive resistance, and now should be massive support. In fact, when looking at the weekly chart, you see a hammer that has a bottom at exactly 80.
.png "USD/JPY Daily 3/5/12")
Also of note is the fact that the trend line that the market has respected for bearishness over the last several years has been broken as well. With this in mind, I feel that we are in the middle of a trend change, and that longer-term, this pair will rise quite a bit. The recently action certainly has done absolutely nothing to challenge that opinion.
Of particular interest to me is the fact that we got a perfect doji at the 80 level on Tuesday. This showed a certain amount of decision making to be done, and we then broke higher which shows that the bulls took back over. In fact, the highs were broken on Friday, so this shows just how much bullish momentum there is currently. The 80 level is now my level to stay above in order to keep buying this pair. I will buy pullbacks in this pair going forward, and I think the 85 level is the first real target in this pair.