The USD/JPY pair has pulled back a significant amount since the breakout a few months back. The original move looked very strong, and we saw the market hit as high as 84 before falling back down below the 80 handle. The pair has been a bit rough to trade, and the fact that the Bank of Japan added ten trillion Yen to their asset purchase program in order to work against the value of the Yen did very little to stem the rally in the Yen. In fact, we are still lower than we were after that announcement.
The last couple of days have given the bulls some hope though, and Tuesday saw this pair closing out the session right at the 80 handle. With the Bank of Japan having a meeting an announcement later today, there could be a move in this market if they go big enough on the easing. Having said that, the global crisis will also play a factor in this pair as well. Typically, when times are bad, this pair will fall, but if the central bank gets involved, this could change a bit. (It has at times in the past.)
80.60 Or more
The pair needs to keep going for me if I am to buy again. The top of the recent consolidation around the 80 mark had highs of about 80.60, and I need to see those broken in order to go long at this point. The 200 day exponential moving average is cutting right through the middle of the Tuesday candle, so this area should have the larger forces fighting it out.
The overnight rate announcement and subsequent policy announcement out of Tokyo could have this pair rallying if the Japanese go full in with their anti-appreciation policy for the Yen. However, they also have the misfortune of being a “safety currency”.
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Because of this, I am going to go long on a close above 80.60 as I think it would should momentum shifting to the upside again. As for selling, I know that the Bank of Japan could intervene if we go too much lower, so I am going to pass on that move.