- The USD/JPY has gone back and forth during a rather quiet trading on Thursday, as we continue to hang around the ¥132.50 level, an area that has previously been imported.
- The market is likely to continue to see a little bit of support underneath, and therefore it would not surprise me at all to see this market go sideways.
- Beyond that, you also have the situation where liquidity is going to disappear for the holiday season, and it’s likely that we could continue to see a little bit of lackluster trading.
Once we get back to January trading, we will start to see liquidity, and it opens the possibility of a return to normalcy. We had that massive candlestick from Tuesday that sliced through the 200-Day EMA, so it does suggest that perhaps we will continue to see downward pressure, but a short-term recovery is also possible, as the Bank of Japan has determined that the 10-year note can rise in yields to the 0.50% level. The market has already risen to the 0.48% level, and therefore it’s likely that we could see the market try to turn around, as the release of pressure on the Japanese yen may pick back up as the Bank of Japan will have to do everything it can to keep yields down, thereby start printing in again.
I Expect a Back and Forth Consolidation Move
On the other hand, if we break down below the ¥130 level, then it will be “lights out” for the overall trend. The biggest problem with this right now is that it is happening during the holiday season, so we don’t have the liquidity to make a bigger decision. Ultimately, I think we’ve got a scenario where we should have a big move soon, either being a continuation or perhaps a complete reversal.
I suspect that by the jobs report in early January, we should have a longer-term signal. If we take out the top of the candlestick from the Tuesday candlestick, then it’s possible that it could break above the 50-Day EMA, opening a much bigger move. I suspect that once we get through the holidays, things it cannot get wild in the spirit. In the short term, I would anticipate more of a back-and-forth kind of consolidation move.
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