The USD/JPY pair rose during the session on Thursday, recapturing most of the losses from the Wednesday session. With that being the case, we feel that the market could continue to go higher, but recognize the fact that we have essentially been in some form of consolidation for quite some time now. With that, we believe that the 103 level could offer a bit of resistance, but ultimately we feel that the market goes back to the 105 level given enough time.
The market should be a buying opportunity every time it pulls back, simply because the 101 level offered so much in the way of support. The market should continue to go higher after that also, as the support looks to be so heavy and predictable. Ultimately, I believe that the market will continue to follow the upward projection given enough time, mainly because of the interest-rate differential level continue to push the US dollar higher than the Japanese yen.
Interest-rate differential should continue to favor the greenback.
The interest-rate differential should continue to favor the greenback as the Federal Reserve will continue to cut back on its quantitative easing program. At the same time, the Bank of Japan should continue to work against the value of the Yen, as it simply works far too hard against the export driven economy out of that country. Because of this, I believe that this market will be a longer-term buy-and-hold type situation, and should continue to offer buying opportunities every time it pulls back. Quite frankly, I have been short of the Japanese yen against several other currencies, taking advantage of the larger interest-rate differential markets.
Ultimately, I still expect to see this pair had to the 110 level, but it might take some time. I’m thinking more towards the end of the year, as we should continue to see a lot of choppiness between here and there, and will find buying opportunities along the way. This market appears to me like one that is getting ready to start entering a buy-and-hold type of phase.
