The USD/JPY pair is one that I have been talking about ad nauseam for several weeks now. This is because I believe that we are in the beginning of a massive trend change that could last months, if not years. With that being said, I am already long of this pair, and simply looking to build my position. In fact, I am also long the GBP/JPY, ZAR/JPY, and EUR/JPY pairs.
The premise is simple: the Bank of Japan has been handed a mandate that can only be satisfied by printing Yen. With a new inflation target of 2%, this means that bank will have to be very aggressive in fighting the value of its currency. In that scenario, it certainly seems like the bullish days for the Yen are at least threatened, if not completely over.
Granted, we have the Federal Reserve which has also stated it was going to continue with several easing measures, but the truth is that there is a bit of a natural bid into the US dollar at the moment anyways. This is mainly because of fiscal cliff uncertainties out of the United States and the fact that Europe looks so slow at the moment.
85
I personally believe that the 85 level will be a massive turning point in the long-term direction of this pair. In fact, I think we have already kind of "shown our hand" as to where we are going by breaking above the 84 handle. The 84 level was a massive resistance area, and I believe that the area right around the 85 handle is simply an extension of this, but based upon longer-term charts isn't as resistive as the 84 handle.
With this in mind, I find the fact that we have formed so many hammers at the 84 level very interesting. I also cannot help but notice that the Monday candle was extremely bullish for this pair, even with the Christmas Eve trading hours. With this being said, I believe that we are about to breakout and over the 85 handle, and when we do this pair will continue much higher. I'm already long this pair, and plan on adding on a daily close above the 85 handle.