The USD/JPY pair fell during much of the session on Thursday, but found the 84 level supportive yet again. The resulting candle was a hammer, and this of course is always bullish when you see it. However, I don't necessarily think that the pair is ready to take off quite yet, and is simply resting after the recent breakout.
I wouldn't however, even contemplate anything along the lines of selling this pair. Quite the contrary, I am very, very bullish of this market. I think that we will have a sideways grind for a while, but will eventually have the catalyst send this pair much higher.
The Bank of Japan has acknowledged that it may need to boost its inflation target, which is simply code for "print Yen." They need inflation in Japan in order to spur economic growth, and the easiest way to do that is to devalue the currency. Ironically, this is essentially what the Federal Reserve does as its mandate and as a result this will be about between two central banks that are looking to kill their own currencies.
84 is crucial
Although I wouldn't go as far as to say that the 84 level itself is crucial, the general area certainly is. I see that the gap that was filled at the breakout this week should continue to offer support going forward. Regardless, with the Bank of Japan more than likely reentering the marketplace in order to devalue the Yen, I have no interest in shorting this market anyways.
Even if we break down a little bit, I believe that we will see the 83 level act as support as well. In fact, the more this pair falls, the more interested I am in buying it on signs of support. Going forward, I believe that if we can pick up a little bit of traction we should see prices as high as 90 in the near-term. Granted, this isn't going to happen next week, but it certainly can happen sometime in the next few months. Ultimately, I believe that sooner or later the “fiscal cliff” discussions will be solved, and I could be the catalyst going forward to push his pair higher. Nonetheless, I think eventually we will see this pair go as high as 110.
