The USD/JPY pair has been one of my favorite wants to watch recently. The last 40 hours in particular has been very interesting as we have seen a significant break of support, only to turn around and bounce back over it. In fact, I believe that we have seen central bank intervention even if nobody noticed.
The Thursday candle saw quite a bit of a downdraft as the Federal Reserve Chairman suggested that quantitative easing would go on as long as needed, and even into the beginning of an economic recovery. In other words, the Federal Reserve has essentially stated that it was willing to print money forever if it was needed.
Because of this, it makes perfect sense that the US dollar would fall in value. In this particular pair, it has been a fight between two central banks that are trying to devalue their own currencies. With this being said, it's been a very interesting pair to trade. Recently, we have seen the 78 handle as massive support and it looks suspiciously solid.
Sudden reversal
The fact that Thursday's candle was reversed so rapidly has me thinking that perhaps the Bank of Japan has clandestinely intervening in this market. And to that the fact that the Friday candle was a straight shot up and I really begin to question things.
I know this sounds a bit like a conspiracy theory, except for the fact that the Bank of Japan has admitted to clandestinely intervening in this market just a few months back. It was roughly around this area as well, and this really makes me wonder. I have been very leery of shorting this market just simply because of the fact that 78 was so suspiciously solid.
As far as I can tell, my fears were fairly well-founded. I think that buying this pair is the only thing you can do still, and on a break of the Friday candle I am more than willing to. I think we run to the 79.50 area or even higher, but recognize there is a serious fight at the 80 handle. Because of this, I am thinking this more as a trade, and less an investment.