The USD/JPY pair has been very bullish lately, but as you can see over the last couple of sessions, both Monday and Tuesday, the 125 level has been in the forefront of the thought process as far as traders are concerned. This is a market that I believe will continue to be very bullish of the longer-term, but it would make sense to pull back a little bit from this area as it is a large, round, psychologically significant number. I think that if we can break above this area, it starts a new leg higher as the market should then head towards the 128 level, and then the 130 level after that.
I do think that a pullback is possible, but at this point in time I am essentially sitting on the sidelines as far as selling this pair is concerned. True, the US dollar is getting beat up against most other currencies, but at this point in time I believe that this one will be a bit of an anomaly. After all, the Bank of Japan continues to offer massive amounts of liquidity in the bond market, and that of course will drive down the desire to own Japanese yen. On the other side of the Pacific Ocean, you have the Federal Reserve which is ready to tighten rates sometime later this year. I think that ultimately this is a longer-term rally that can be taken advantage of by simply holding onto positions. However, the biggest problem with this pair now is that it doesn’t pay hardly anything in the realm of interest-rate swap. It’s only at Interbank levels that you can realize any significant interest being paid at the end of the day. This is part of what is keeping this market down.
Taking advantage of value
Simply put, this market pulls back it shows any type of support between here and 121, I am a buyer. I believe that it is simply value in the US dollar, and that it’s only a matter of time before we head back towards the current levels. On the other hand, if we break above the 125 level, then I’m a buyer there as well.
