The USD/JPY pair fell rather significantly during the session on Wednesday, facilitated by the Federal Reserve released that suggested many of the members are willing to step in and increase monetary easing if the US economy doesn't pickup. This pair is indicative of a fight between two central banks that are trying to be as easy with their monetary policy is possible. In other words, this is a race to the bottom. As you can tell by the chart - the Federal Reserve is winning this battle hands-down.
When you hear the expression "currency wars", this is one of the most obvious pairs to use as an example. You have the Bank of Japan who is currently trying to devalue the Yen, and on the other side you have the Federal Reserve which seems like it sole reason for existence is to destroy the US dollar. Looking at this chart, you can see that the Federal Reserve is winning, but there is a certain amount of support being shown at the 78 handle.
The move on Wednesday showed that the knee-jerk reaction to the downside wasn't quite enough to break the 78 level. This is because the Bank of Japan is more than likely acting clandestinely at this level. They have done so and it made it to it previously, and it was right about this area. Is because of this I am actually somewhat bullish of this pair even after the Wednesday action.
78 and 76
The 78 level has been massive support in this currency pair, and I see as fully no reason why that's about to change. If there was every reason for to break down, we saw this on Wednesday. A bit of the bearish pressure was given back by the end of the day, and this suggests that there to simply wasn't enough order flow to push the price down to a point where it would stick.
I believe that the Bank of Japan is currently defending 78, and as you can see on the longer-term charts it has defended 76 in the past. Because of this, I am only buying this currency pair and I think that we are about to see it insert a consolidation zone between 78 and 80. I will continue to buy supportive candles closer to 78, knowing that somewhere below me is the Bank of Japan trying to shore up my trade. I of course will be taking profit at the 80 level as it is obvious resistance.