The USD/JPY pair gapped at the open on Monday, falling significantly but spent the rest of the day filling that gap. You can see that on the chart I have a potential wedge market off, and I think that the wedge will be the key to whatever direction this market goes going forward. On top of that, you have to keep in mind that this Friday as the nonfarm payroll report, and this pair tends to be very sensitive to that announcement.
With all of that being said, I feel that this market will more than likely find the rest of this week choppy at best, and more than likely look at the nonfarm payroll number as a potential barometer on what the central banks are going to do. We all know that the Bank of Japan will continue to have a very loose monetary policy, which of course is Yen negative. However, the Federal Reserve has a loose monetary policy at the same time, so any hint that they may have to taper off of quantitative easing will more than likely send this pair straight through the roof.
The Federal Reserve is focusing on employment numbers now.
It's a well-known fact that the Federal Reserve is more concerned about employment than anything else at the moment. If that's the case, then of course the nonfarm payroll numbers will dictate where this pair goes in the future. With that being the case, I find it very difficult to think that we will break out of this wedge between now and Friday, and therefore believe that this is a short-term traders market only. However, if we did break out of this wedge I would suggest that perhaps it would be the beginning of a larger move, especially if it's higher. There is a lot of noise below, so selling is going to be a bit tricky, but not impossible. If we break out to the upside, and perhaps clear the 100 handle, I think this pair would more than likely head towards the 105 handle, and probably much higher than that.
