By: DailyForex.com
The USD/JPY pair rallied during the session on Wednesday, breaking to fresh new highs as the 104 level was tested. However, we did get a little bit of a pullback later in the session in reaction to all of the chaos that ensued after Federal Reserve Chairman Ben Bernanke suggested on Capitol Hill that quantitative easing could be tapered off of sooner than much of the market would've anticipated.
.jpg "USD/JPY daily may 23")
Because of this, the markets sold off a lot of the risk assets out there, and the Japanese yen was bought up. However, at the end of the session we saw the market bounced back, resulting in a relatively bullish candle overall. This kind of nonsense will more than likely be the norm as we go through this change in monetary policy stance by the Americans. However, overall I feel that the Federal Reserve will taper off, not necessarily cut off all at once, despite the drama that we saw in the stock market.
There is a trend for reason
One of the things it was truly up steam is that the US 10 year Treasury note saw a significant spike after testimony by the Chairman, gaining 15 points which is a relatively strong move in that market. As the interest rate differential between the United States and Japan increases, you can bet your bottom dollar that this market will continue to rise overall.
This is especially true now that the Bank of Japan has started on a very aggressive quantitative easing policy. While it appears that the Federal Reserve is starting to warm the market that it may slowly start to turn its monetary policy around, and by extension the interest rates in the American economy, the Bank of Japan is so far away from doing so that this will very quickly become a long-term trend - although I believe that we have been in a long-term trend for some time now. This will be a lot more like 2005, when you simply bought this market every time it dipped for the foreseeable future. That is my plan going forward, and I believe that any supportive candle is a buying opportunity going forward.