The USD/JPY pair rose during the session on Tuesday, bouncing off of the bottom of what has been a fairly reliable consolidation area. I believe that the 101 level below is massively supportive in its implications of buying pressure, and that the 103 level above is the resistance area that we will ultimately have to break out from in order to continue higher. I think we will, but it may take some time.
A move above the 103 level since this market looking for the 105 level. I think this because of a couple of different reasons, as the 105 level has been important over the longer term, just as the height of the rectangle below is 200 pips. On a break above the 103 level, that means we should hit 105. Therefore, I have a couple of reasons to think that we will go there.
Keep in mind, the interest-rate differential will continue to favor the Americans over the longer term anyway. The Bank of Japan continues to pour money into the Japanese Government Bonds, which is a form of quantitative easing. The more that the BoJ pours into the JGB markets, the lower the value of the yen in theory.
Ten-year notes
This market is quite often driven by the interest-rate differential between the two countries ten-year notes. Because of this, keep an eye on this market, and that was the interest-rate differential lightens in favor of the United States, this pair by all means should go higher. Because of this, I believe that we have entered a longer-term basing move, which should lead to longer-term buying opportunities. Quite frankly, I would not be surprised to be long of this market for several months, if not years. I am currently short of the Japanese yen against other currencies that offer higher-yielding interest-rate, but think this will be the true market to be involved in once the interest rates widen, and the Americans start adding jobs at a decent pace. Until then, it could be a bit choppy, but I ultimately believe we go much higher.
