The USD/JPY pair fell during the session on Wednesday, but bounced enough to form a hammer just below the 100 level. With that being the case, it appears the market is still trying to form a little bit of a base in this region, and therefore we think that the market will ultimately go higher. A break above the 100.50 level is what will be needed in order for us to start buying, but once that happens we believe that this becomes a long-term buy-and-hold type of market. After all, the Federal Reserve is on one side of the fence, while the Bank of Japan is on the other. With that being the case, we feel that the market should continue higher, and that any pullback at this point time is going to be a buying opportunity.
The shape of the candle will matter, and as a result we think that the second hammer like candle does suggest that there is real willingness to step into the marketplace by the bullish. If we can get a move above the 100.50 level, we feel that this market will more than likely head to the 105 handle over the course of the next couple of months, and possibly even higher if we get some type of actual announcement on the Federal Reserve that suggests that they are ready to taper off of quantitative easing.
Expect more announcements out of Japan as far as quantitative easing over the course of the next couple of months, as that should continue to push his market higher as well. This is a case where both central banks are very loosen monetary policy, but the Americans are so much closer to ending that than the Japanese that it has come into play with the currency pair. We believe that pullbacks going forward will be buying opportunities, and that we may be getting ready to see the beginning of a longer-term buy-and-hold type of situation in this market like we had seen 6 or 7 years ago in this pair.
Written by FX Empire