By: DailyForex.com
The USD/JPY broke down rather significantly during the day on Wednesday, breaking the bottom of the recent consolidation area. Now that we are well below the 122 handle, and look very negative and as a result I think that it’s only a matter of time before we test the 120 handle. While it is a negative move, the reality is that I see a target of support below and therefore I have no interest in selling at this point. Unless of course you have some type of heads up on this move, any type of selling at this point will be simply “chasing the trade”, one of the easiest ways to lose money in the Forex markets.
Because of this, the only thing that I can do at this point is simply wait to see whether or not we get a supportive candle that I can start buying. I think that a daily supportive candle will appear over the next several handles, and at that point in time it has to represent “value” in the US dollar. That value is something that I fully anticipate taking advantage of.
Interest-Rate Differential
I believe that the interest-rate differential will continue to push this market higher, as the Bank of Japan will add stimulus sooner or later, or at the very least not raise interest rates. Meanwhile, the Federal Reserve has to raise interest rates at least once but the question then will be whether or not they have to do it twice.
The size of the candle is rather impressive, so I am not looking for some type of bounce right away. I think that lower prices are very likely, but at this point in time like I said, either you are short of this market already or you need to wait for the longer-term move. I think that the 120 level below is not only supportive, but it extends all the way down to the 118.50 level as we had seen back during the month of September.
