The USD/JPY pair fell during the session on Tuesday as the 90 handle becomes far too rich for the buyers to break through. We believe that eventually will be overcome, but in all honesty we have risen far too quickly in order to maintain that type of momentum. However, a pullback is not only a real possibility at this point time but rather a welcome event by us as we would like to be able to reenter the market at a lower price.
We believe that most of the market feels the same way as it is more than obvious that the Yen is going to be losing value for some extended time. After all, you have the Bank of Japan getting ready to announce pretty significant moves against the Yen, and more importantly expanded asset purchases. This should continue to put downward pressure on the Yen over time, and we fully expect to see a move to the 100 level before it’s all said and done. However, this will be a” one-way” move, and certainly will take time to get there.
We see the 85 level as being the “floor” in this marketplace, and if the market does in fact pullback to that level, we should see quite a bit of support. In fact, we would become aggressively long at that pullback as it should serve as a launch pad for the next rally higher. Alternately, we could see a move over the 90 handle before a pullback happens and as long as the 90 handle can be supportive going forward. In that particular case, we wouldn’t be totally opposed to going long and simply putting their stop losses below the 90 handle as the momentum picks back up.
If you look around the Forex markets, the Yen is suffering against most currencies. Because of this, we believe that this longer-term trade will work out well as the Yen should continue to do depreciate over the course of 2013. We believe that this is a long-term trade just waiting to happen, and as a result are willing to be very patient.
Written by FX Empire