The USD/JPY pair gained for the third session in a row on Wednesday as the “risk on” trade came back into vogue. The Bank of Japan has been jawboning the value of the Yen down again, and as a result it looks as if they are starting to become a bit concerned about the high value of the Japanese currency.
The move has been pretty impressive, but the market is running into a significant resistance area in the form of the 79.50 to 80 levels, and as a result we have to be very careful at this point to see if the area holds or not. If we get a daily close above the 80 handle, we are more than willing to buy this pair as it would be a significant accomplishment by the bulls.
With Ben Bernanke speaking before Congress today, there is high potential for some kind of remarks to push this pair. At the moment, the markets seem fairly confident that he is going to go down the path of easing, but there are contradicting opinions out there as well. If the Chairman makes comments that suggest that the Fed will ease further, this pair will fall as it would suggest that the Bank of Japan will be competing with the Fed directly on the “race to the bottom” for their currencies.
However, if Mr. Bernanke doesn’t give the hint that easing is a distinct possibility, the Dollar should gain against the Yen as the Bank of Japan is most certainly going to continue easing. With this scenario being what it is, this is a difficult trade to take one way or the other until the end of the session. Simply put, if the market closes on the daily chart above the 80 level, there is a strong chance that we go ever higher. However, if it closes lower for the session, we will see it fall further. On that note though, we are hesitant on selling this pair as the BoJ will intervene sooner or later if we keep falling.
Written by FX Empire