USD/JPY had a very slight gain during the session on Wednesday as the pair bounced from the 78 handle. This is an area that I find very intriguing, mainly because it looks to me like it is an obvious support and resistance line on the longer-term charts. But what I find even more intriguing about it is the fact that it is roughly where the Bank of Japan admitted to clandestinely intervening a few months ago. I cannot help but wonder whether or not they are doing the same at this moment in time.
Beyond that, it looks to me like the pair is trying to grind lower, but simply does not have the momentum to do so. This may be predicated upon the concept that the Federal Reserve may get its monetary easing policies cranked back up, and this of course would weaken the US dollar overall. At the same time, the Bank of Japan is most certainly easing, and it should weaken the Yen overall. But the markets know that nobody can kill the value of the currency like the Federal Reserve, and therefore will not go against them.
Intervention is most certainly a possibility by the Bank of Japan once we get below the 78 handle. Is because of this that I won't sell this pair, even though it looks horribly weak. I believe that the summertime will help this pair as the major players simply aren't in the market at the moment, and are more likely to be found at places like the Hamptons, Riviera, or other such vacation hotspots.
78 is massively important
At this point in time, I don't really have a technical reason to buy this pair other than the 78 handle itself. Because of this, I find it difficult to buy this pair and willing to wait a little bit. However, the hammer from Monday certainly looks intriguing to me, and I would be more than willing to buy this pair if we break the top of that trading range. The last two days have been inside the body of that hammer, and it does suggest to me that we are trying to build some type of base.
