The USD/JPY pair initially shot higher during the course of the day on Friday, but as you can see we found enough resistance of the 109.50 level to turn things back around and form a shooting star. The shooting star of course is a fairly negative sign, but only fools would step in front of this market and try to start shorting. Yes, I recognize that the market could in fact drop from here, and quite frankly I expect it to. However, I think this is going to be a buying opportunity waiting to happen.
The 107 level below has a bit of a cluster, and as a result I think there will be some support there. A pullback to that area should find buyers, and a supportive candle in that region would have me buying. On top of that, I believe that there is a significant if not massive amount of support at the 105 level as it was the site of the recent massive breakout.
Interest-rate differentials.
I’m looking for supportive candle, but ultimately I believe that the central banks will continue to push this market higher overall. After all, the Bank of Japan continues to keep a very loose monetary policy, while the Federal Reserve continues to taper off of quantitative easing. That is tantamount to tightening, and as a result the US dollar should continue to strengthen overall.
I do believe that ultimately we break above the 110 level, and I have to admit that I am a bit surprised that we’ve gotten this high in this short amount of time. This market is absolutely parabolic so what I’m waiting for is some sanity to come back in order to start buying. I think if you keep large stops when you get back involved in this market it becomes a longer-term buy-and-hold type of situation. Alternately, if we get above the 110 level, I think we continue a long-term uptrend. Every time this market dips, it should be an invitation to start buying again, just like the situation that we had several years ago back in the old “carry trade” days.
