USD/JPY is a pair that I have been watching for some time now. With the Bank of Japan working in the shadows, there has been somewhat of a natural bid in this market. Granted, the pair has many should drift lower but we have seen a bit of support as the 78 handle. It is below this level that the Bank of Japan tends to get involved in this pair via intervention. It is because of this that I have wondered how long it was going to take before the pair started to move higher.
With the Federal Reserve extending the Operation Twist, the value of the dollar will rise as the stepped in to buy longer dated bonds. The Japanese yen is especially sensitive to this, and as a result we have seen a bit of a burst tire in this pair. However, we are not at the level that I want to see in order to go along.
I should state that any trade that I taking this pair is more of a long-term nature, and not a short term scalp. It is because of this that I am fully accepting of any losses that I get. The fact is that the risk to reward ratio is massive for the type of trade him talking about.
80.50 And beyond
Looking at this pair, it becomes quite obvious to me that the 80 zone actually extends all the way up to the 80.50 level. While the Friday action did see us attempt to break out and above it, the market failed to stay that high. However, the fact that the market is closing just a few pips under that level makes me believe that we will in fact see a breakout soon.
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With this in mind, a daily close above the 80.50 level has been buying this pair. I will aim for nothing less than at least the 83 handle, if not the 84 handle. If we can get above 84, this would be a trade that I would be willing to hang onto for months, if not years. The fact is that the Japanese economy doesn't deserve a currency that is this strong. With its aging population, the Japanese will find themselves having to get creative in buying their own bonds. Because of this, there will come a day when the Yen finds itself very weak again.