By: Christopher Lewis
USD/JPY has been the one pair I have paid the most attention to over the last several weeks. The pair is simply at a crossroads, and I believe that this pair is about to make a serious decision on the future direction it takes.
I have been bullish of this pair, and for several reasons. Having said that today could be very important for the outlook. The Bank of Japan has recently embarked on massive easing as they have added another ten trillion Yen to the asset purchase program that they purchase Japanese Government Bonds, REITS, and ETFs with newly created Yen. In other words, by pumping more Yen into the markets, this should work against the demand as supply grows.
The Federal Reserve Chairman stated last week that the Federal Reserve still has the tools to accommodate the economy if it falters. The jobs numbers that are coming out today are being read by the market as a gauge to the likelihood of further easing in America. If the number of jobs added in April turn out to be light, this could make the case that the Fed is more likely to ease going forward.
Confluence, and in a big way…
The area we are in at the moment is a massive one for a multitude of reasons. The 80 level was the site of a massive breakout, and should be the site of support as it is being retested at the moment. The 200 day exponential moving average is also just below, and this will bring in support by the longer term traders as well.
The 50% Fibonacci level is just above the handle, and this is also another reason to think support could appear. And finally, on the weekly charts we have the 52 week moving average just below as well. This is the “yearly moving average”, and it will be supportive as well. Needless to say, there are a lot of reasons to think that support is here.
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The announcement out of Washington will certainly move this pair. If the number comes out strong, this will make the likelihood of easing in America slim, and this should shift the market to a bullish bias in an instant. I am long of this pair at the moment, and will be buying if we get a better than the expected 160,000 jobs announced.