The USD/JPY pair fell during the session on Friday, retracing a lot of the gains that it had recovered the previous day. That being said, this market still has a massive support area underneath it at the 100 handle, so shorting at this point in time is an even a thought. With the Bank of Japan being more than willing to devalue the Yen, we have no interest in shorting this market under any circumstances.
Quite frankly, we would be absolutely stunned to see the 100 level broken for any significant amount of time, without the buyers stepping into pick this market back up. It will be interesting to see how the Monday morning in Asia acts, simply because of this sell off was rather significant in a very bullish market. However, we have come nowhere near projected targets, and we think that the markets may have overreacted most of this week to comments out of the Federal Reserve Chairman in front of the U.S. Congress, when he suggested that perhaps quantitative easing could be tapered off earlier than a lot of participants had expected. However, it seems that a lot of people have not paid attention to the fact that he also said that they could extend it longer, it just depended on economic data.
That being the case, the markets really don’t know what to do and we believe that the weekend is exactly what they need to get their thinking in line again. Remember though, Monday does have the Americans celebrating Memorial Day, and as a result the markets will be very illiquid during that time period. Because of this, most of the action will happen in Asia and Europe, and we will have to wait and see what the Americans think of all of this on Tuesday.
Nonetheless, it’s just a simple matter of waiting to see when we can start buying this cross again in order to take advantage of the “one-way trade” that is just now starting to pick up steam. We believe this is a multi-year move, and as a result can be very patient.
Written by FX Empire