USD/JPY Daily Outlook April 3, 2012

By: Christopher Lewis

USD/JPY has been one of my favorite pairs to trade lately. While the rest of the world has been sweating every micro movement in the EUR/USD pair, this one has been quite robust and certainly has had a trend. The USD/JPY simply put, has been on fire overall.

The breaking of the trend line from the financial meltdown is a big deal. The breaking of the 80 level is just as big, especially when you think about the fact that the Bank of Japan intervened twice, and couldn’t break above it. The 80 handle is in essence the “turning point” in this pair for me at the moment. As long as we are above it, I am overall bullish on it.

82

82 is also an interesting level, and that is exactly where we find ourselves. The Bank of Japan helped push this pair higher by announcing an expansion of their bond buying program, which is essentially like printing Yen and throwing them into the market. The market has certainly priced this in a bit, and any expansion of this program could push it much higher.

The 85 handle is absolutely crucial. If we can get above that, I plan on being long in this market for a very, very long time. Perhaps even years. However, until that time comes, we need to find support in order to push the market higher. I believe that the 82 level is an attempt at that, although it should be said that the Monday candle closed at the very lowest part of the candle at this handle. However, if it can hold – this would be a bullish sign indeed.

The 82 level could show signs of support for the next few days coming up. This is because the Non-Farm Payroll report on Friday is extremely important in factoring in the possibility of another round of quantitative easing in the United States. If the jobs report is strong, meaning well above the 200k mark, we should see the pair make a serious attempt to break above it if we get a large surprise to the upside. If not, the move could be down to the 80 handle. Between now and then, short-term buying might be a viable strategy as long as the 82 level can hold.