USD/JPY again captures my attention for the session as it continues to lurk around the vital 80 handle. For months and months we have seen the 80 level be an area where price reacts over and over. The area is obviously important to someone with serious money, and as such I am very interested in it.
The Thursday session saw the pair fall initially, only to turn around and bounce to form a hammer yet again. This is the second hammer in a row, and also touches the bottom of what I believe is the up trending line for an up trending channel. However, the 80 handle course will cause a reaction is simply because of the fact it is a "large round number."
The pair does look bullish, and one has to keep in mind that this is simply the market trade decide who is going to be more dovish, the Federal Reserve or the Bank of Japan. Recently, the Bank of Japan has stepped up its asset purchase program in order to devalue the Yen. On the other side of the Pacific, the Federal Reserve has openly stated that it is employment numbers that it is paying attention to at the moment. There is some expectation of quantitative easing out the Federal Reserve, but if the employment numbers are fairly strong there will be lowered expectations of this. It is with this thesis that I evaluate this pair.
80.60 and an up trending channel
To me that channel looks more and more obvious on the chart. Granted, we are approaching an area that price simply has to move higher, so I suspect that the Friday session will produce some fireworks. With this type of setup, we have two potential trades to the upside: the pair could be bonds on a break of the highs from the Thursday session as it is the top of a hammer, or could be bought on a fresh high at the 80.60 level. Either way is acceptable strategy for trading this pair currently, and would take advantage of what would be perceived as the Federal Reserve holding on monetary easing.
I firmly believe that the Friday session could be the one that makes a few decisions for this pair. Is because of this that I am watching this pair closer than any other one for the session. As for selling, I simply will not do it as the Bank of Japan has been very active in working against the Yen below.