The USD/JPY pair attempted to rally during the session on Thursday, but met significant resistance at the 82.50 level. In fact, the resulting failure formed a shooting star at the end of the day, in this now looks like a market that is finally starting to feel a bit overextended. After all, and the last couple of weeks we have shot straight up in a parabolic move with almost no rest.
Looking forward, we think that the Bank of Japan will continue to get its wish of a weaker Yen, but a pullback is absolutely necessary now that we have seen such an explosive move higher. While a break of the lows from the Thursday session is technically a sell signal, we certainly won’t be doing that, and we will look for support below.
Looking at the charts, we feel that the 81 handle should be supportive, and most certainly the 80 handle will be. We think that this pullback should prove to be a buying opportunity going forward, and will do so once we get the supportive daily close.
Alternately, we see the shooting star as a massive buy signal if we managed to break the top of it as well. While this parabolic move certainly need some kind of rest, in this particular market that can be something that takes quite a while to show up. If we managed to break through that resistance area, there’s no reason to think that there would be any stopping until we get the 84 handle. It is the 84 handle that should be overly resistive, and because of that we think that if we can get above the area, we could be in a buy-and-hold type of situation at that point.
Nonetheless, going forward we are buying pullbacks that show signs of support as we think this uptrend is definitely going to continue for the foreseeable future. As far as selling is concerned, we have absolutely no reason to do so. In fact, the lower this pair goes, the more we would be interested in buying as this can lower our cost basis going forward.
Written by FX Empire