The USD/JPY pair shot straight up during the session on Wednesday, as the battle between the two central banks continues to favor the Federal Reserve. The Americans look like they are having to question whether or not they were going to taper off of quantitative easing, while the Japanese look ready to keep their monetary policy easy for an extended amount of time. In fact, the Bank of Japan continues to suggest that they are in the very beginning part of the easing process.
The candle was very long, and broke through a couple of shooting stars. That of course a very strong signal for this pair, and as a result I believe that the next leg higher has just started. I went long during the session, and quite frankly will add every time this market pulls back. Now that we have cleared the 102 level, I believe that we have seen another sign that a long-term move started.
Central bank speak.
This pair will be all about central banks and what they say. After all, there are a lot of different things that come out during the course of any particular week that can reflect upon the central bank. There are statements of course, but there are also press conferences where various members will be involved in, and their words will be parsed by traders around the world. Any hints of quantitative easing being tapered off in the United States will send this pair skyrocketing, which quite frankly it looks like the pair is already trying to anticipate that.
The one thing that could throw a wrench into the mix is if the Federal Reserve suggest that it will not taper off of quantitative easing anytime soon, and that will without a doubt send this pair straight back down as it would go counter to what people expect. With that being said, I still think that the market continues to go higher, but we will see choppiness from time to time. The longer-term trader will continue to add to positions going forward, propelling this market higher over the next couple of years.
