The USD/JPY pair fell during the session on Wednesday, but as you can see remains above the 99 handle, an area that should offer significant support. Because of this, we are looking for some type of supportive candle in order to start buying the US dollar, and selling the Japanese yen. Remember, the Bank of Japan will continue to work against the value of the Yen, by purchasing bonds in the JGB market, bringing yields down which of course dampens demand for the local currency.
Ultimately, this pair probably depends more on the Federal Reserve and the Bank of Japan, simply because we know that the Bank of Japan is just starting a quantitative easing schedule. On the other side of the Pacific, the plans of the Federal Reserve are a little less clear, but we do see the potential for tapering off of quantitative easing much quicker in Washington than Tokyo. With that being the case, we look at the employment numbers out of America for signs of tapering possibilities. The last nonfarm payroll numbers that came out of the US suggested that the employment situation is picking up slightly, although we are a long way away from tapering.
With that being the case, we do expect a little bit of an upward bias in this market but recognize the fact that there is still quite a bit of uncertainty on both sides of the Pacific, as well as the psychologically significant number of 100 just above. That being said, the 100 level has been sliced through several times, so will more than likely just offer a short-term blip on the radar. Ultimately, we do believe this market goes higher and that we are forming some type of buy-and-hold type of scenario.
Any supportive candle is enough of a reason for us to start buying, no matter the time frame. This could end up being a short-term trader’s buy-and-hold type scenario as well, meaning that you could get in and out of the market several times. Regardless, we are not selling this pair.
Written by FX Empire