The USD/JPY pair fell for the session on Tuesday as the downward pressure continued. However, by the end of the session we saw a significant bounce and as a result formed a nice looking hammer at the bottom of the supportive cluster that we have been watching from the early part of February.
Looking at this chart, it does appear that a perfect hammer is forming, and as a result we are more than willing to buy a break of the top as it would signify buyers stepping back into the marketplace.
We have been stating lately that although the market was very weak we were not willing to sell the USD/JPY because of the Bank of Japan and its monetary policy. With that being the case, there is a little bit of a “put” in this marketplace, and as a result we know that the Japanese will intervene if the Yen appreciates too much. In a sense, this is almost a “no-brainer”, as the Federal Reserve Chairman Ben Bernanke has already stated that he “agreed 100% with what the Japanese authorities are doing.” In other words, Ben isn’t going to get involved.
With that being said, we believe that this market will eventually track higher and aim towards the 100 handle. This will be a straight line up obviously, so we do think that the Yen will continue to be sold throughout the rest of the year at the very least, and possibly through 2014 as well. Because of this, we believe that every time there is a dip in size support, much like the candle for the Tuesday session, we think it is a buying opportunity. It is through this prism that we look at this market right now and decide that buying is the way to go.
If we managed to break the bottom of the hammer, this of course would be a very negative sign. However, in this particular set of circumstances we believe that it will simply have us buying this market at lower prices. In fact, we actually prefer that so that we can get a real bargain.
Written by FX Empire