I believe that the USD/JPY pair will be one of the most interesting pairs for the year 2013. Looking at this chart, I see that the 84 level has offered quite a bit of support over the last several sessions, this is especially bullish for me as I saw the 84 level as so resistive. I believe that for most of the last several months that the key to higher levels was going to be a breaking of 84, and this is what we finally have accomplished.
As you look at the chart, you can see that the Friday candle was no different than the Thursday candle. Both are hammers, and quite frankly the closest thing to a negative candle that I can find on this chart over the last several sessions is a slightly red doji on Wednesday. If that's as bearish as this market is going to get, that is a very bullish sign.
Don't fight the central banks or the bond markets
If you have been reading these articles, you know that the Bank of Japan is a major factor in this trade for me personally. Now that the LDP won a decisive victory in Japan, it appears that we will certainly see massive easing going forward. The fact is that the Bank of Japan is about to become very easy with its monetary policy, and with that comes a weaker Yen all things being equal.
On the other side of the Pacific, you have the United States that is seen a bit of a rise in its bond yields. Every time the US Ten-year Treasury note rises in yield, this pair rises as well. Quite frankly this is a comparison between the two bond markets most of the time and it is obvious that the market is favoring US bonds right now for the yield, meaning that the Dollar will continue to gain against the Yen over the long run.
Quite frankly, I believe that if it wasn't for the fact that we are entering the holiday season, this pair would have continue higher. I fully expect to see this pair continue higher once we get past the holidays and as a result will be adding to my already long position once we clear the 84.50 level.