The USD/JPY pair fell hard during the session on Tuesday, but found the 97 level supportive enough to keep the market somewhat elevated. However, it appears that with the viciousness of the selloff that this market will more than likely continue lower in the short term. However, I do believe that this market eventually goes higher, based upon the Federal Reserve and whether or not they taper off of quantitative easing. If they do, that will strengthen the US dollar quite significantly, while the Bank of Japan continues to work against the value of the Yen.
At this point in time, we are still a little bit uncertain as to what's going to happen during the month of September, but the latest minutes from the Federal Reserve meeting suggested that there are more people on board with Ben Bernanke than originally anticipated. Because of this, I think eventually this pair will take off to the upside.
Buying opportunity
I believe that this will be thought of as an excellent long-term buying opportunity, as I expect to see this pair hit 110 sometime towards the end of this year, or the beginning of next. This may happen quicker than anticipated, if the Federal Reserve does in fact taper off. If they don't, that is a sign that perhaps things are weaker than anticipated, and then at that point time you could expect to see the Bank of Japan intervened either verbally, or possibly even directly in the foreign exchange markets.
Going forward, I am looking for some type of supportive candle in order to start buying. If you are a longer-term trader like I tend to be in this pair, simply buying down here is close enough to get the job done. However, I understand that many of you have to keep your stop losses a bit tighter, so having said that I would recommend looking for a four-hour candle from which to trade. Something along the lines of a hammer on support would be excellent as it would show that the buyers are stepping back into the marketplace to support this pair.
