By: Christopher Lewis
The USD/JPY pair is one that has the attention of many traders at the moment. This pair is also a great example of the fickle nature of traders in general, as the emotions involved in this pair have gone back and forth quite a bit over the last several days.
The pair originally broke out beyond the massive 80 resistance level to the cheers of the bulls. This signified a massive bullish move, and it looked like the trend changed at that point as a massive downtrend line had been broken as well. Adding to that the idea that the 200 day moving average had been broken and you had a lot of people thinking that the market was going to shoot straight up.
However, reality set in, and this pair fell back down. The reality isn’t necessarily that the pair can’t’ break out, but rather the market doesn’t go in one direction forever. However, there are a lot of reasons to still believe in the bullishness of the market at the moment. For example, the Bank of Japan is expanding its asset purchase program, and the Federal Reserve is still being quiet about the possibility of further quantitative easing. Because of this, the pair should still find a bid. Also, if it falls enough – intervention cannot be ruled out by the Japanese yet again.
50% and 80
The pair is quickly approaching the 80 level, and it is there that I think the real fight begins. The shooting star for the Wednesday session suggests that we may perhaps fall a bit more, but once we reach 80 I think we could see massive support come into play. After all, it is roughly the 50% Fibonacci retracement level from the up move as well.
.png "USD/JPY Daily 4/12/12")
With all of this in mind, I am very interested in the action over the next 48 hours. I think that if we can find support – this could be the chance for those who missed the original rally to get involved as is so often the case. The pair is a “buy only” one at the moment, and I am looking to do so near 80.