The USD/JPY pair initially fell during the course of the day on Monday, but as you can see we bounced and formed a hammer. The hammer suggests that the market is going to go higher, and with the recent consolidation area, that doesn’t really surprise me much. After all, the 101 level has been massively supportive, and as a result this market should continue to go higher from here, heading towards the 103 region which is the top of the consolidation area we have been in for some time. With that, I feel that the market will continue to favor short-term trading, simply buying at the 101 region, and selling at the 103 region.
To be honest, I don’t really see a catalyst for breaking out of this range between now and the end of the summer, as this market as well as many other currencies pairs tend to be very quiet during the summer. On top of that, we are not entirely sure we were going to do as far as the Federal Reserve is concerned, so it’s very possible that this market is going to simply hang about this region.
Continued volatility means short-term trading only.
I believe that the continued volatility will make this short-term traders market only, as it can be difficult to see a significant amount of momentum building in one direction or another. Because of this, the market should be one that will favor short-term traders, as the choppiness will continue to keep the market from going in a long-term move. However, I do feel that eventually we will break out to the upside, and above the 103 level.
The 101 level below continues to be supportive, but what I find most interesting about this is that the support runs all the way down to the 100 level as far as I can see, so therefore I feel that it is massively order, and therefore probably one of the most important levels in the Forex markets right now. I think it would take a massive amount of bearish pressure to break down below 100.
