The USD/JPY pair initially fell during the course of the day on Thursday, but as you can see the 103.50 level has offered support yet again. With that, we bounce significantly and formed a beautiful looking hammer. I feel that this hammer suggests that we are going to go back above the 104 level, and ultimately trying to reach the 105 area, an area of much more significant resistance.
I believe that we will eventually break above that level, but it’s probably going to take quite a bit of effort and momentum building in order to do it. I think that once we get above that area, we probably head to the 110 level, and the interest-rate differential between the two economies certainly warrants some type of move like that. At the end of the day though, I believe that it will be choppy and as a result I’m focusing more on short-term moves.
103
I believe the 103 is the “floor” in this marketplace right now, and as a result I would not expect to see this market trade below there. In fact, I would be rather aggressive about buying supportive candles down there as well, as I would expect to see the impulsive breakout the tested, and proven to be true. However, it’s possible we don’t even go that far so therefore I’m not exactly holding my breath to see that particular move.
The Bank of Japan continues to try to work against the value of the Yen, and is starting to finally make a dent in the bullishness. That being the case, I feel that the Bank of Japan will eventually get what it wants to get, and this pair will continue to climb higher. This will be especially true if the job markets in the United States continue to improve, as it should lead to more quantitative easing reduction by the Federal Reserve, which of course brings up interest rates and should bring up demand for the US dollar in general. Ultimately, I do not have a scenario in which a cell this currency pair.
