The USD/JPY pair went back and forth during the session on Thursday, but as you can see on the chart did almost nothing in the end. This very neutral candle shows just how confused this market is at this moment in time, and it also suggests that the 99 handle is going to continue to be important overall.
All that being said, I am still looking for reason to buy this pair. Yes, I know that the Federal Reserve stated that there are some concerns with employment and tapering quantitative easing going forward, but in reality the Japanese central bank is much more aggressive about quantitative easing than the American one. Because of this, we should continue to see a widening interest rate differential between the two nations as far as the 10 year notes are concerned, the main driver of this pair most of the time.
Bank of Japan says it's a one-way trade.
Because of the Bank of Japan being so aggressive in its quantitative easing program, I have no interest in selling this pair at all. This is a simple trade for me, I am either buying or simply on the sidelines. This is been the way that I traded this pair for the last couple of months now, and quite frankly I see aptly no reason to change this anytime soon.
If we can get a break of the 100 level on a daily close, I think that would signal a pretty significant move higher. We would more than likely attempt to get to the 103 level in relatively short order, and possibly even higher. That being said, I am looking to buy, either through that signal or perhaps some type of pullback that produces a supportive candle. A supportive candle should be based around the 99 level, possibly 98.50 as far as I can tell. Even if we fell below there, I think that the 95 handle becomes massive support, possibly the "floor" in this marketplace right now. I have this feeling that if we got below the 95 level for more than a day or two, the Bank of Japan would probably do something to take action.