The USD/JPY pair rallied during the session on Friday, bouncing off of a longer-term trend line that has been supportive over the longer term. That being the case, it appears that the market will rally from here, which I believe first showed the possibility of it happening on Wednesday as we formed a hammer. That hammer is based not only upon the uptrend line, but the 101.50 level, which of course has been very supportive over the last several months. With that, I believe that there is a lot of buying pressure below, and that the US dollar will continue to strengthen against the Japanese yen.
In the meantime, it is possible that we grind sideways a little bit, but we are approaching this trend line, and “time is running out”, as it were, I believe that the move is coming sooner rather than later. Because of that, I am actually a buyer of this currency pair right here. I should fully disclose that I am short of the Japanese yen against other currencies at the moment that pay a positive swap.
Longer-term basing pattern.
In my opinion, we are building some type of basing pattern for the longer term uptrend, and that being the case I feel that people can enter this market in small positions, and then simply add to them as time goes along. This is what I’ve been doing in some of the other more exotic pairs that feature the Yen, and with that being the case, I think that I will start doing that in this particular pair. In fact, I see several reasons to think that this market is going to continue going higher, and with that I feel fairly confident.
As far selling is concerned, I see no reason to do so until we break down well below the 101 level, something that probably is a going to happen anytime soon. Even if it does, I feel that the downside is somewhat of a limited move, as the 100 level should be a large, psychologically significant barrier.
