The USD/JPY pair shot higher initially during the day on Friday, but found enough resistance near the 111.40 level to turn around and fall. We are essentially forming a neutral candle for the day, but I think the market is simply trying to gather itself after the explosive moved to the upside on Thursday. The Federal Reserve is more hawkish than originally anticipated, and that should continue to work in favor the US dollar against the Japanese yen as the Bank of Japan is light years away from doing anything remotely close to tightening monetary policy. I believe that the 110 level underneath should continue to offer support, and is now very likely going to be the “floor” in the market going forward.
Buying short-term dips
I believe the best trading strategy going forward is going to be buying short-term dips, and adding every time a short-term debt proves itself to be supportive. That’s not to say that we can’t fall, just that it appears that the impulsivity in this market is most certainly to the upside, and therefore makes buying much easier than selling.
I have a target of 112 initially, and then 112.50 after that. Longer-term, I think we could go as high as 115, but it’s going to take a while to get there. This pair tends to be very volatile so that should not be much of a surprise. Look for value, it’s the best way to trade in this market as the US dollar will continue to benefit from the interest rate Outlook for America. This is especially true one compared to Japan, as the Japanese central bank is extraordinarily dovish and should continue to be for the foreseeable future.
Written by FX Empire