The USD/JPY pair fell hard during the session on Thursday as the “risk off” attitude permeated the markets. With that, I feel that this market has found a bit of support down here though, because as you can see the market has struggled to get below the 101 level. However, it must be noted that the large candle that formed during the session on Thursday closed towards the very lows, and that of course is a very negative sign.
However, the longer-term uptrend line on the chart hasn’t been violated, and as a result I still find it difficult to sell this pair. On top of that, the Bank of Japan continues to work against the value of the Yen, and that should work in favor of this pair over the longer term. In fact, we have a situation where the Federal Reserve is essentially in the middle of tightening its monetary policy, and that should at even more fuel to the fire.
Longer-term upside potential
As far as I am concerned, this pair has a lot of longer-term upside potential. Granted, there will be times where we pullback like we have recently, but at the end of the day this is a market that is going to go way out of its way to go higher as the jobs numbers in the United States continue to do better. Because of this, I have no interest whatsoever in selling this market, and believe that these pullbacks are in fact going to be longer-term buying opportunities. With that, I feel that adding with small positions going higher should continue to go in the favor of the trader. I believe that we will eventually hit the 105 level, and possibly as high as the 110 level. In the meantime, expect a lot of volatility but I believe in the end the interest-rate differential will continue to work in favor this market, which of the long-term does tend to drive currency markets.
As far selling is concerned, we would have to get below the 100 level for me to even consider it, but right now that does not look very likely.
