The USD/JPY pair initially tried to rally during the session on Friday, but after the jobs numbers came out as expected, the pair pulled back to form a bit of a shooting star. While this is a relatively negative candle, the truth of the matter is that we are simply bouncing around in a relatively tight consolidation area. We recognize that the 120.50 level above is resistive, while the 118.50 level below is supportive. With this, it’s difficult to really make any major trades in this market, as we do not anticipate a break out anytime soon. This simply seems to be a market that is ready to go sideways and do very little.
The Japanese yen continues to be a bit stubborn, but at the end of the day there is a significant amount of quantitative easing coming out of Tokyo, which could very well expand given enough time. The meantime, I would anticipate staying in this range. It’s really not confusing, I just simply want to buy down at the 118.50 level, because I believe in the longer-term uptrend.
One-way trade
Now, some people can trade in both directions but I tend to simply favor when I think the longer-term move is going to be. In other words, they would sell the market at the top of the range, and buy it at the bottom. You have to be a bit nimble to do so, and quite frankly I would rather be surprised with more gains than I expected, which is why I prefer to trade with the trend. After all, more than likely the market will break out in continuation. Because of this, it’s much safer to simply buy at support. On top of that, the 118.50 level has been very reliable and shows no real signs of giving up yet.
Once we do break out, I feel that this market will probably go to the 122 level next, and then eventually the 125 level. It’s been very stubborn for quite some time now though, so patience will be needed to see the larger gains.
