The USD/JPY pair initially fell during the session on Wednesday, but as you can see the 104 level has offered support yet again. This support cause the market to bounce hard enough to form a very positive looking candle. However, the 105 level just above is without a doubt resistive. In fact, it has quite a bit of resistance all the way up to the 105.50 level, and it is above there the things get truly interesting. In the meantime, I believe that this market is will struggle to go higher, but eventually should breakout as the longer-term uptrend certainly seems to be an effect still. After all, this rollback hasn’t necessarily been strong, it’s been more like a “slow negative grind”, and because of that I’m not overly concerned about the way this market has pullback, just think that the market is taking a bit of a rest after going higher.
Jobs will continue to be the most important thing in this pair.
The market pulling back should bring enough momentum into the marketplace eventually to break out above. The market is focusing on the interest-rate differential, and the likelihood of the Federal Reserve tapering off of quantitative easing. With that, if we can get better than expected jobs numbers, this will have the market looking at the likelihood of the Federal Reserve tapering off of quantitative easing and driving interest rates higher in the United States. As the Bank of Japan continues to work against the interest-rate differential and therefore the Yen, I believe that this market will continue to find plenty of reasons to go higher, regardless of any noise above.
The rising interest rates in anticipation of the Federal Reserve buying less bonds will continue to work in favor the US dollar as more traders by bonds out of the American Treasury. Even if we pullback at this point in time, I see plenty of support near the 103 level, and all the way down to 100 below there in order to continue to be a “buy only” market.
