The USD/JPY pair fell during the session on Tuesday, but as you can see found support at the 102 level yet again. I am starting to see the potential for some type of ascending triangle at the moment, but I do have to admit that my longer-term bias is to the upside anyway. Quite frankly, the Bank of Japan is going to continue to try and weaken the Japanese yen, and as a result sooner or later they’ll get their wish. It might take several months, but ultimately the Japanese yen will have to weaken if the Japanese economy is to ever get better, as it is so export driven.
That being said, I now believe that the 103 level is the key to going much higher, with the first major target being the 105 level, as I see it as a significant resistance level. I still believe that the 105 level will be conquered as well, and that we will eventually hit the 110 level sometime this year. If you look back at history, this pair has a long history of bouncing around erratically before trending. This is happened every time the pair has essentially “bottomed”, which is what this is starting to look like.
If the Americans can ever add enough jobs, this market will skyrocket.
The nonfarm payroll report will continue to be the main driver of this pair ultimately. While the movement of the USD/JPY typically is greatly influenced by the ten-year note differential between the two countries, that will be greatly influenced by whether or not the US economy is adding jobs. This is because the Federal Reserve has been flooding the bond markets with cash, trying to drive down interest rates. As they continue to step out of the bond markets, this will drive up the difference between the two interest-rate, and thereby driving money into the United States and out of Japan. I believe that we are in the early phases of a long-term rally in this pair that we haven’t seen the likes of and about six or seven years.
