The USD/JPY pair fell during the session on Monday, breaking down and heading towards the 101 level. That level courses significant support, and has been since the beginning of the year. Because of this, I believe that this market will more than likely find buyers somewhere just below, and it does not escape me that we are getting close to the nonfarm payroll number. That of course means this market drastically, and as a result I think we are setting up or a move that’s going to be the upside regardless. However, if we do touch the 101 level, I believe that this market should bring out a lot of buyers. Even if we do break that level, there should be support all the way down to the 100 handle, although would be a negative sign that we finally broke down.
I believe that this market will ultimately go higher, simply because the Bank of Japan is still trying to find ways to loosen monetary policy. On the other hand, the Federal Reserve is starting to taper off of quantitative easing, although the GDP numbers weren’t exactly encouraging. Because of this, it’s likely that we will see continued volatility, and perhaps more range trading throughout the summer.
Sometimes, you have to play with the market offers you.
I personally believe that this market is going to bounce between the 103 and the 101 levels. This is a good opportunity as far as I can tell, simply because there is without a doubt a defined and obvious consolidation area. This is the best type of range trading that you can find, and the fact that we have the summer coming certainly doesn’t hurt the situation going forward, because the summertime often will find the market is going sideways anyway. With that, I am very encouraged by the potential range trading that we can see, believing that short-term traders will continue to cash in on a very profitable marketplace. However, if we break out of that range, there is the possibility that we could see a larger move. At this moment in time though, I give that about a 10% chance.
