By: Christopher Lewis
This week should be a big one for this pair. After all, both central banks will have an impact on the markets, as the Federal Reserve has a two day meeting on Tuesday and Wednesday, and the Bank of Japan in meeting later in the week. The BoJ is expected to increase the size of their asset buyback program, with essentially is a bond buying program. This is a backdoor way to print Yen, and the value of the currency should be punished as a consequence of this.
The Federal Reserve on the other hand seems to be backing away from quantitative easing and as a result of this – interest rates are expected to rise over time. The Americans seem to be doing better than most of the industrialized countries, and this should force the Fed to reign in all of the slack that is now in the monetary policy of the past few years.
80 Still Matters
I still see the 80 handle as a major area. The area was the site of the massive breakout, and as long as we are above it – I have to consider that move valid. The 50% Fibonacci level is just a few ticks above it, and the 200 day EMA is just below as well. All of these things combine to make me believe that the sellers are going to run into trouble at this level. Of course, I am interested in seeing this pair continue to bounce from the near miss it had a few sessions back.
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The Yen is probably going to be in trouble for some time to come, and this reaction is much like the one we saw back in 1995, which was a massive change in trend in this pair. The choppiness is to be expected as the changing of a trend is never a cut and dry thing, and this is no different. However, the Japanese are quite ready to destroy the Yen if they have to, and the US seems to be on at least somewhat stable footing. I am buying dips, adding to the position as I go long.