The USD/JPY pair bounced during the course of the session on Wednesday, as we continue to meander between the 124 level on the bottom, and the 125 level on the top. Because of this, we believe that the market is in fact bullish, but we need to get above the 125 handle in order to do so. If we get above there, we anticipate it will more than likely be a reaction to the Nonfarm Payroll Numbers on Friday. With that being said, it is very likely that the Thursday session is fairly quiet, but ultimately we believe that that move is coming. Quite frankly the longer-term uptrend continues to impress and we believe that there’s no reason for it to change right now.
If we do pullback, we think that there is more than enough support below to turn this market back around, so we are not interested in selling this market at all as long as we remain above the 121 handle, perhaps even as low as the 120 level. Because of this, there is more than enough reason to think that the buyers will come back into the marketplace again and again. Ultimately, this comes down to the fact that the Bank of Japan continues to keep the market very liquid, and buying quite a bit of bonds out of Tokyo. With that, we think that the Japanese yen should continue to lose value overall.
On the other side of the Pacific Ocean, you have to keep in mind that the Federal Reserve is very likely to raise rates sometime this year, and as a result the interest-rate differential should continue to favor the US dollar overall, and we believe that the longer-term interest-rate outlook should continue to favor the United States dollar, and as a result the market should continue to go higher every time it pulls back as there are buyers below, and with that being the case, we remain “buy and hold”, and “buy on the dips” going forward as the market should continue to be very strong.
