USD/JPY fell during the session on Thursday as the “risk off trade” continued. The pair looks like it is trying to find some type of support in that general vicinity and this of course makes sense as the 78 handle has been so important. By the end of the Thursday session, we have printed a very neutral candle.
The candle is in the epicenter of a massive support area between 78 and 78.75 roughly. This area has been protected by the Bank of Japan from various reports, and as such we are willing to take a long position on the first supportive candle that we see. This means that a break of the Thursday highs would be good enough for us to go long, as would any type of hammer or bullish engulfing candle a little below where we are now.
As for selling this pair is concerned, the Bank of Japan would certainly get involved in this market if the price was the fall below 78. Because of this, we will not sell this market even if it breaks below this area. In fact, we are willing to buy supportive candles below with even more vigor than the ones in this general area.
Going forward, 80 should be significant milestone in this currency pair, followed by the 80.60 level. If we can get above both of those there’s a good chance that we end up in the 84 area before it is all said and done. Above that level and we are talking a long-term buy-and-hold type of situation.
It should also be said that this pair is ideal for the short term trader, as there is so much volatility in a tight range that we can perhaps pickoff 20 to 30 pips at a time. It isn’t exactly glamorous work, but in the end it all pays the same. Because of all of this, we are not selling this pair, but would rather buy the closer we get to the 78, as we think the consolidation should continue. In fact, there is a little bit of an argument to be made that we could be heading into consolidation between 78 and 80.
Written by FX Empire