The USD/JPY pair has been going higher for some time now. There is a trend line on the attached monthly chart, and you can see that it has been relatively reliable, as the market continues to march higher. That being said though, it has been a bit choppier lately, as the market continues to struggle. I believe that the 105 level is a significant resistance area, so little bit of a pullback here really wouldn’t be much of a surprise to me. Nonetheless, I see a massive amount of support at the 100 handle, so quite frankly supportive candles anywhere between here and there are interesting as far as I can see.
I do think that we will eventually break above the 105 handle. We might even do it during the second quarter, and at that point in time I think that we had to the 110 level without too many issues. That is an area that we will more than likely find sellers at as well, a significant pullback from the 110 level could happen. Nonetheless, we have certainly broken out to the upside since the massive downtrend from the financial crisis, and as a result I do think that this is starting to become more of a buy-and-hold type of currency market. In fact, I am currently long of the Turkish lira versus the Japanese yen. Of course, that’s more of an interest-rate differential play, but it has the same of fact.
105 will be crucial, but then again so will the trend line
I believe that a lot will be decided at the 105 level, even though I believe that eventually breaks out to the upside. I don’t know if the market can do it right away, because it does seem to be fairly significant. Ultimately though, I see far too many reasons to think that this market will be able to sustain a significant move to the downside. After all, the United States is starting to tighten up its monetary policy while the Bank of Japan continues to try to find ways to weaken the value of the Yen. With that being the case, I think ultimately this pair has to go higher. The real question of course will be whether or not we see it happen anytime soon as there are a lot of moving pieces at the moment. I am a buyer of this pair.
