The USD/JPY pair shot straight up on Tuesday as the trading world reacted to the Bank of Japan’s continued easing of the monetary policy the country is following. The
Weakening Yen is something that the Japanese economy desperately needs, and the slowing of exports is causing headaches with economic officials.
The ability of the pair to rise straight to the 78.50 level is impressive, and the fact that the daily candle is closing towards the top of the range shows that perhaps we could see a continuation of this move, although the 78.50 level is considered to be resistive. The pair certainly has moved quite a bit over the last several sessions, but the trend is still very much to the downside overall. The pair looks strong for the moment, but the last several years have seen this pair absolutely come apart.
The Bank of Japan will more than likely continue to do more, but the real battle could be at the 80 level. It is here that we see massive resistance in this pair as it was once massive support. If we approach this area, we wouldn’t hesitate to sell on any signs of weakness in this pair. Ultimately, it is difficult to think that this pair will suddenly change trends, but it must be noted that a breakout above the 80 handle would be a significant event in and of itself.
The pair continues to be a sell for us, but with this candle it seems that if we are patient, we will get our chance to sell at higher prices. The nice thing about the 80 level is that it is a binary event, we either are above or below, and we want to be in the overall direction from that point. The selling of this pair can only be done on a temporary trade, as the 76.50 level is the start of serious support and the Bank of Japan’s intervention area. Because of this, we are willing to sell the weakness, but must get out of the market as it approaches the 77 handle.
Written by FX Empire