By: Christopher Lewis
The USD/JPY pair was one that most of us were ready to give up on. The pair was being manipulated and acted in a very stagnant manner for what seemed like an eternity. On one side of the trade, you had a Bank of Japan that was desperately trying to lift prices, and on the other side of the trade you had almost everyone else in the world trying to sell off the pair.
The recent action has been quite different though. The Bank of Japan has expanded the buyback of JGBs in an attempt to drive down the value of the Yen. So far, the markets seem willing to play along, and it should be noted that the massive trend line from the financial meltdown has been broken, and decidedly so.
80 is the key for now on….
The 80 level is without a doubt one of the biggest spots on this chart. In fact, it was once so resistive that the Bank of Japan did two direct interventions that failed to push prices up and through it. With this in mind, classic technical analysis says that what was once resistance should now become support. So far, we have seen just that in this pair.
With that in mind, my entire thesis is dependent on the idea of that level holding up. The Friday action saw a breakout of what I believe was more accumulation in this pair as the bulls needed more people to join in. Once the 80 level looked safe, more traders come in to push prices higher.
.png "USD/JPY Daily 3/12/12")
The Friday candle is a great sign for the bulls, and I now think we are going to 85 in the relative near term. In fact, as long as we are above the 80 level, I am willing to add to my position every time this pair falls and shows a bit of support. The recent breakout and breakthrough of the massive trend line both are impressive, and I believe the trend is in the middle of changing. The 200 day EMA is well below current prices as well, so even the trend traders are starting to question things. I am long already, and buy on pullbacks as long as we are above 80.