The USD/JPY pair tried to rally during the session on Thursday, but found the 105 level before too resistive. Because of this, we pullback informed a shooting star, which of course is one of the more bearish signs that you can see. Nonetheless, it doesn’t always mean that were heading towards the market meltdown, rather that we could be heading more or less towards a little bit of a pullback. This makes sense to me at the moment, simply because of the poor jobs situation in the United States. After all, it was the employment situation that the Federal Reserve seems to be so concerned about, and until we get better jobs numbers, the likelihood of a significant tapering by the Federal Reserve is remote.
On the other hand, the Bank of Japan still works against the value of the Yen, in a slight attempt to increase the export market for Japanese goods. Also plaguing the Japanese central bank is the fact that Japan has one of the world’s most aging populations, and a massive amount of debt owed to those retirees. Because of this, they need the value of the Yen to depreciate, otherwise it could be an absolute disaster.
As the Federal Reserve has stepped in to help Japan in the past, I have serious doubts that the Americans are too concerned about the Japanese yen depreciating against the US dollar. After all, we are at an extreme height for the Japanese yen in relation to the rest of the world’s currencies, and with that feel that most central banks would be okay with continued bullishness in this market.
That being said, we still need to see bullish jobs reports and economic numbers out of the United States to convince traders that the Federal Reserve is getting ready to taper further. Ultimately, they will have to, but it’s all matter of timing now. I am bullish of this pair longer-term, but recognize that the technical signs for a pullback are certainly there in the chart. Any signs of support below, and I’m a buyer.
Written by FX Empire