By: Christopher Lewis
The USD/JPY pair is one of the ones that have been garnering the attention of not only me, but many of my trading friends as well. The pair has recently looked like one that has started to make the rend change that we all have been thinking of for so long, and the action has been pretty one way.
The pair had broken above a massive trend line form the financial crisis, and also saw the 50, 100, and 200 day moving averages cross. The 80 level gave way as resistance, and by all accounts, the trend was changing. However, the pair has had a bit of a setback in the last few sessions, and it is obvious that it isn’t going to be a one way ride north from here. (As if anyone thought it would be.)
Falling hard
The Tuesday session saw this pair fall hard and even close at the lows for the session. The pair has been pulling back lately, but the real killer was the Bank of Japan failing to announce any expansion of its asset purchases in order to weaken the Yen. I have a feeling that much of the market expected to see that. I know I did to be honest.
The failure of the BoJ to step in and weaken the Yen even more was a bit of a surprise truth be known. However, there is now a bit of an expectation that the Federal Reserve may do a bit more quantitative easing as the most recent jobs number out of the US was a bit on the weak side. However, this was only one bad jobs number, so that thought may be a bit of a stretch as well.
.png "USD/JPY Daily 4/11/12")
I see the 80 level as a massive one, and expect it to be where the real battle begins. If this pair falls back to that level, I think that any signs of support will offer a chance for those traders that haven’t participated in the breakout to get involved. I am watching this pair for a hammer or another bullish candle happens in the next 100 pips in order to buy again. A daily close below the 80 level would have me changing my tone, but until then – I can only expect that the breakout was real.