The USD/JPY pair fell hard during the course of the day on Tuesday, but somewhere near the 108.25 level ended up finding enough support to turn things back around and form a nice-looking hammer. This hammer suggests that the market is ready to go higher from here, but we did have a couple of shooting star like candles from the past couple of sessions. Because of that, I have a feeling that the market is probably going to pull back. That is most certainly what I hope to see, simply because this market is parabolic to say the least.
If we pullback at this point in time, the 107 level is a significant area as far as I can see, and with the clustering that had been seen there recently, I believe that the market will more than likely find support. With that being the case, it’s likely that buyers would step in there, and even if we didn’t see the support there, I’m fairly confident that we would see it somewhere closer to the 105 level as it was the scene of a significant breakout.
Central banks.
The central banks involved in this currency pair are moving in two different directions. After all, the Bank of Japan continues to loosen monetary policy, but the Federal Reserve is cutting back on quantitative easing. In a sense, the Americans are tightening of monetary policy and that should affect bond yields before it’s all said and done. With that being the case, the market should continue to favor the US dollar overall, so I have no interest whatsoever in selling this marketplace. I don’t care that it’s obvious that we need to pull back, I am more interested in buying pullbacks over and over again, building up some type of massive position for when I believe is going to be a longer-term buy-and-hold type of proposition. A few years ago, all you had to do was buy this pair every time it fell. While I don’t think we are back to those days, I certainly think that there is only one way you can trade this market.
