The USD/JPY pair fell during the bulk of the session on Tuesday, but found enough support in the region of the 102.40 level to bounce and form a hammer. Of course is a significantly bullish sign, especially considering that we have been grinding our way higher. With this, I feel that the market is in fact going to head to the 103 level next, where will meet a little bit of resistance. Ultimately though, I think that the market will find much more resistance near the 104 level, so I think it will be overly surprising if 103 gets broken relatively easily.
Once we get above the 103 level, I feel that is a relatively straight shot to the 104 handle. Above there, we had to the 105 level, which is my longer-term target anyways. I think of this pair offers buying opportunities every time it dips, and with that short-term traders will be involved as well. After all, the USD/JPY has a history of being relatively volatile, and short-term traders love this pair because it’s got a tight spread and the moves quite a bit at times.
Buy only.
As far as I’m concerned, I will not sell this market, even if we break below the bottom of the hammer from the Tuesday session which is typically a very negative sign. At that point time, I would simply wait until we solve support near the 101.50 level again, which has seen significant buying time and time again.
I think that the Japanese yen will continue to weaken over time, against most currencies. The US dollar doesn’t really pay much in the way of a swap for holding it against the Japanese yen, so this pair might be a little bit slower moving than many other ones. I am actually short of the Japanese yen against several higher yielding currencies such as the Turkish lira, and have been for some time. With that being the case, I of course have a negative bias against the Yen anyway, and with the significant hammer that we saw form during Tuesday, it only reinforces my thinking.
