The USD/JPY pair had a back and forth session on Tuesday, as the market formed an inside candle. However, the candle is positive, and it is sitting on top of the 100 handle. This is a natural spot to see support come into the marketplace, and because of this I feel that a break of the highs for the session on Tuesday will be more than enough to get more buyers into the market.
I think of that a lot of the profit taking at the end of the session on Tuesday would have been because of Japanese Prime Minister Abe speaking later this morning. Because of that, I feel that a lot of the "weak hands" in the marketplace would have been concerned about being exposed to headline risk. After all, he is anticipated to speak about the so-called "third arrow" in the economic plan to restore Japanese economic conditions. If this third arrow doesn't hit the mark, we could see a significant selloff in the Nikkei, as well as this particular currency pair.
Long-term trend
I still believe that long-term trend is to the upside now. Because of this, I am perfectly comfortable with holding onto long positions in the various again related markets, and I also feel that the Japanese will not test the market and its resolve. After all, we have seen the Nikkei absolutely thrashed after a significant gain for the year over the last couple of weeks. Perhaps this was a warning to the Japanese that the markets expect ridiculous amount of quantitative easing, and that they better had produced them.
Going forward, I think that the market is going to aim for the 105 level first, and then ultimately one hand by the end of the year. I know that seems like a fairly significant move, but let's face it - this pair tends the move quite rapidly once he gets its legs. I will be buying on pullbacks, but I think this pullback that we've seen recently is sitting on enough support to qualify for one of those moves.
