The USD/JPY pair fell pretty significantly during the Monday session, slicing back below the 125 handle. I have to admit I was a bit surprised at how deep the pullback went, but ultimately we are still well within the tolerance of the consolidation area. In fact, I believe that the consolidation area and more importantly the support, runs down to the 123.50 region. If we can get some type of supportive action between here and there, I’m willing to continue going long of this market. After all, a move above the 125 level was rather significant from the longer-term perspective as well.
I believe that the Federal Reserve raising interest rates later this year is more or less a known quantity, while the Bank of Japan continuing to buy Japanese Government Bonds will continue to drive down the demand for the Japanese yen. In other words, this is a bit of a “perfect storm”, and I think the market knows this.
Career move
I actually think that some careers are being made by this pair right now. After all, every time this market has pulled back, you been able to buy and hang onto the trade. I don’t see any reason why that changes anytime soon, and with that I remain bullish of this market and believe that we will go to much higher levels over the next several months.
I have no interest in selling, and really can’t imagine where I would start doing it. I believe that a significant pullback could happen, but that should only be thought of as offering value in the US dollar as there should be plenty of interest in going long given enough time. I can see support at the 123.50 level, the 121 level, and the 120 handle. So while a pullback could be rather steep and violent, the smart trader will simply be on the sidelines waiting for the opportunity to start going long again.
