USD/JPY Daily Outlook- May 5, 2014

Christopher Lewis

The USD/JPY pair initially tried to rally during the session on Friday, but found the 103 level to be far too resistive to continue going higher. That area acted like a brick wall, sending the market right back down and forming a shooting star. This is an interesting reaction to a stronger than anticipated nonfarm payrolls number out of America during the day, but the question then becomes whether or not the market suddenly focused on the underlying weakness of the employment situation in the United States. After all, almost 1,000,000 people left the workforce. That is a significant amount of weakness underlying what otherwise would been thought of as a strong number.

Going forward though, it appears that the Federal Reserve will continue to taper off of quantitative easing, and as a result ultimately the interest rate differential between these two countries should expand. With that being the case, I suspect that this market will finally break above the 103 level, and then head to the 104 level in short order. All that area, the 105 level is most certainly calling.

Massive support below.

Adding more credence to the idea of going higher, there is an uptrend line just below that is in fact significant. Because of this, I feel that there will be plenty of buying pressure if we do fall from here, and I will be looking for some type of supportive candle near it. On top of that, the 101.50 level has been supportive enough that we feel there will be plenty of buying in that general vicinity as well.

It isn’t until we get well below the 101.50 level that I would feel comfortable selling, and at that point in time I would expect this market the head to the 100 handle. However, I believe that is not very likely, even though the candle for Friday was very sickly looking. I believe that ultimately we will breakout in go to the 110 level given enough time, but this is going to be more of a fight and less of a trend.

USDJPY Daily 5514

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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