The USD/JPY pair fell drastically during the session on Friday as the market close below the 95 handle. However, we did not break the bottom of the hammer, and presently sit on top of the 38.2 Fibonacci retrace that level from the entire move higher. Because of this, we believe that the market will see buyers stepping into the market in the near-term, and as a result we are looking for supportive candles in which to buy. We never broke the top of the hammer from the Thursday session, so of course that buy signal did not get fired off.
Going forward, we fully expect the Bank of Japan to get involved if we fall too far. The 90 handle is deftly the next major support area, and it happens that the 50% Fibonacci ratio is there as well. Going into the future, I believe that this market will continue higher, but we will more than likely have a bit of volatility in the near-term. After all, people are trying to figure out what the Federal Reserve is doing, and the FMOC meeting later this week should have some implications on this market, as well as many others.
The selloff in the pair has been a bit drastic, but it’s not surprisingly look at it in general considering how parabolic the market had been in the previous months. That being the case, a sharp pullbacks certainly isn’t anything out of the ordinary in this particular situation.
What is not shown on this chart is the fact that we are currently hovering right around the 100 day exponential moving average, and as a result this market has plenty of reasons to bring in the buyers. One of the things you have to keep in mind is that the Friday session in the United States was what is known as a “quadruple witching” session as multiple options markets were expiring at the same time, and this always causes a bit of crazy volatility late in the day. Because of that, we do not necessarily trust the move for the latter half of the session, and the real question will be answered when we open on Monday.
Written by FX Empire