The fact that we broke above the top of the hammer from the Wednesday session doesn’t surprise me much though, as we have been so well supported at the 101 handle. This is simply looks like the market is ready to continue consolidating between the 101 level on the bottom, and the 103 level on the top again. With that, I see no reason whatsoever why we should continue to go higher, although it’s probably going to be a bit of a grind at this point.
It’s also possible that we are looking at the summer range. It would not be uncommon for this pair to bounce back and forth for a couple of months while liquidity drains out, but keep in mind that I still have a potentially upside move in mind with this marketplace. After all, the Bank of Japan is looking to keep the value of the Yen down, and they do continue to have a very easy monetary policy. On the other hand, the Federal Reserve looks like it’s ready to start tapering again, and that should continue to tighten monetary policy. In that scenario, this pair should continue to rise over time.
I am short the Japanese yen.
I am currently short the Japanese yen. However, it’s not in this particular pair because there is no swap. After all, if you’re going to get paid to hang onto a trade, that’s a better way to go than one that doesn’t do any swap. There will come a time where this pair does pay swap again, and when it does you can fully expect this market to go higher. The meantime, a lot of the Yen weakness in this market is probably more of a “knock on effect” from other currency pairs. Full disclosure, I am short of the Japanese yen against the Turkish lira, and the Norwegian krone. Both of those pairs offer a positive swap.
