The USD/JPY pair rose during the session on Wednesday as the “risk on” rally continues. The U.S. Congress came up with a “fiscal cliff” agreement that keeps the United States dollar recession for the short-term. After all, taxes will not be raised against so many of the citizenry, and as a result it avoids a certain amount of pain.
On the other side of the Pacific, we have the Bank of Japan who is more than likely going to pummel the value of the Yen going forward, the markets are anticipating this. This move has been strong, and this breakout on Wednesday does appear to be continued of bullish momentum from what would have been consolidation over the last several sessions. Because of this, we feel that buying this market and expecting a move to the 90 handle really isn’t too far out of the realm of possibility.
We are not selling this pair under any circumstances, and in fact would be more than willing to buy this pair on pullbacks. There is quite a bit of support at the 85 handle as well, so if we go back to where the gap had been formed at that level, we are more than willing to go ahead and start buying again. We think that ultimately this pair should continue much higher, and the 90 is only a pit stop on the way to much higher prices.
Looking forward, we think that the market is certainly going to be due for a correction, but we will not be concerned about this and think that the 84 level is the “floor” in this marketplace as the Bank of Japan will almost undoubtedly step into this currency pair if prices start tumbling again. With this being said, we are very bullish, and continue to add to are already long positions as we think we could see a print as high as 100 by the end of 2013. Again, selling is not a thought at this moment in time as we think the Bank of Japan has stated its case, and made it very obvious that they are not going to tolerate this downtrend any longer.
Written by FX Empire