By: Christopher Lewis
The USD/JPY pair has been a favorite of mine lately, and it is starting to act like the pair of old, when it was one of the best markets to trade. Many of you may not have been trading Forex a few years ago, but it used to be a simple matter of buying this pair every time it dipped. I think we are getting ready to enter this phase again. However, the trend changing is something that can bring about a lot of “noise” in the markets, so choppiness could be common.
The pair breaking above the 80 level simply cannot be over inflated. The importance is quite large, and now we have the 85 level as well. If that level gives way – the tide will turn rapidly in my opinion. The trend line that gave way a few weeks ago for me was the actual start of this move, and I think that going forward this market could be a long-term buy and hold, but we have to get everyone on the same side first.
82 and the bounce
The Federal Reserve didn’t mention quantitative easing in the minutes released on Tuesday, and as a result it now seems even more apparent that the Federal Reserve is much closer to raising interest rates than the Bank of Japan. The BoJ is on the other side of the fence, even going so far as to expand their bond buyback programs massively, essentially printing Yen.
The US economic numbers continue to show growth, at a time the rest of the world simply looks as if it is ready for a recession. With this in mind, it makes sense that the Dollar gains and this pair should be especially sensitive as the BoJ is working so hard against the Yen.
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Because of all of this, I see 82 looking to offer support still, and am buying dips in this pair. The selling of this pair is impossible until we break down below the 80 handle. The 85 level above will be resistive, but I believe it eventually gives way. Once it does – we will be flying, and I will be holding.