The USD/JPY pair went higher during the course of the day on Tuesday, testing the 120 level. This level offered resistance, and we pulled back ever so slightly. However, I think that we will break above the 120 level soon, and send this pair to the 120.50 level next. I believe that we go above there obviously, as I am bullish of this pair longer-term because of the interest-rate differential that we will continue to see between the United States and Japan. Remember, the Federal Reserve is no longer involved in quantitative easing while the Bank of Japan is most certainly very gung ho about it.
That of course should continue to drive interest-rate differential conscious traders into the US dollar, although the differential isn't huge at the moment. Nonetheless, the Federal Reserve is much closer to raising rates than the Bank of Japan is, so quite frankly there’s no reason for this pair to go down for any real length of time.
Buying dips
I continue to buy dips in this pair going forward, as I believe that we will head to the 122 handle, and then the 125 level. In fact, I believe that we are in a longer-term “buy-and-hold” type of scenario soon, and as a result I will be looking to initiate a huge position in this marketplace. Traders learn habitual things, and simply buying this pair at one point in time was the way to make quite a bit of money. Because of this, I believe that a lot of the longer-term traders out there are looking to build those large carry trade positions yet again. It’s too bad that the world economy doesn’t quite support that yet, but of course traders are always trying to get in ahead of time.
There might be the usual random headline that pushes this pair down in a flight to safety, but quite frankly I think the Japanese yen is very unattractive at this point in time, and as a result I look for this pair to continue to go higher every time we pull back and find support.
