The USD/JPY pair rose during the session on Thursday, but as you can see we are still mired in essentially a nowhere market. The 99 handle seems to be the focal point of traders at the moment, and as a result I think that the market will more than likely do nothing in the short term. With that being the case, it's very easy to ignore this market, but I think it is a mistake to do so. After all, this is going to be the front lines if you will for the quantitative easing battle between the Federal Reserve and the Bank of Japan.
You have to keep in mind both of the central banks are trying as hard as they can to keep up loose monetary policy, but it must be said that the Federal Reserve is probably closer to tightening than the Bank of Japan is. This of course has been a bit skewed by the fact that the Federal Reserve did not taper during the last meeting, and because of that this market should continue to be a bit jittery.
It's only a matter time
It's probably only a matter of time before the Federal Reserve does have to taper off of quantitative easing, and because of that I would expect this market to continue to go higher. 100 of course will have a psychological significance going forward, but I believe that we will slice through without too many issues simply because we have broken through at several different times.
On top of that, the Bank of Japan should continue to be extremely aggressive when it comes to easing, as they are not only buying bonds in Japan, but they are interfering in the stock markets as well as a guide by ETFs to prop up the Nikkei. All that being said, this market should continue to favor the US dollar of the long-term, but that being said it is going to be a long grind higher and not some kind of massive move in my opinion.
