The USD/JPY pair shot straight up during the session on Thursday, breaking well above the 100.50 level, an area that we thought would offer a bit of resistance. Because of this, we feel that this market will continue higher, and that any pullback in the future should be a nice buying opportunity. With that being the case, we feel that this still will depend on what the central banks in both America and Japan are doing, and right now it appears that the Federal Reserve is much closer to tapering off of quantitative easing than the Bank of Japan is. In fact, the Bank of Japan has just started that cycle, so we should continue to see strength in this marketplace.
The first time unemployment application number out United States came in lower than anticipated, and this could be a sign that the employment market is picking up in America, and if that’s the case, this gives the Federal Reserve. The ability to taper off of quantitative easing relatively soon. If they do that, the US dollar will skyrocket in value, and the Japanese yen being a currency this being actively working against by its own central bank should continue to fall. In other words, this market should shoot straight up, and this could be a nice long-term buy-and-hold type of situation.
Pullbacks will be buying opportunities as far as we can tell, unless of course the jobs numbers in America get worse. Ultimately, we believe that the Federal Reserve is going to have to taper off of quantitative easing in a few months, and the market seems to be aware of this. In that scenario, this market can do nothing to go higher, and we now anticipate this market going to the 105 level in the next couple of months.
As far as selling is concerned, it would take something significant for us to change her mind. Right now, we believe that this market is basically in the process of bottoming, and as a result we believe this market cannot be sold anymore.
Written by FX Empire