The USD/JPY pair broke a little higher during the course of the session on Thursday, clearing the 124 handle. Because of this, I believe that this market will continue to go higher given enough time. I also think that the market will reach towards the 125 handle and as a result I am essentially “buy only” when it comes to this market. After all, the Bank of Japan continues to buy Japanese Government Bonds, which effectively lowers the interest-rate paid by the bond markets in the Tokyo. This of course brings down the value of the Yen as less people want to buy those bonds, and therefore less people will need to buy Yen.
On the other side the Pacific Ocean, we have the Federal Reserve, which of course has already admitted that they’re going to raise interest rates at least once. With this, it’s only a matter time before we go higher as the US dollar has more interest-rate differential in its favor now that it did previously. With this, I feel that the trend continues to go higher.
Longer-term buy-and-hold
I believe that longer-term it’s a buy-and-hold type of market, but I also realize that pullback should be looked at as value. In other words, you can build a core position bonds and to it in small increments going forward. I think that it’s probably only a matter of time before the market break above the aforementioned 125 handle, and then continue to go much higher, with the 130 level being my longer-term target. I think that a lot of longer-term traders are starting to build a massive positions in this market, as the interest-rate landscape has most certainly changed. In fact, it looks as if the Bank of Japan is going to continue to be ultra-easy when it comes to monetary policy, so I don’t see this trend changing anytime soon. In fact, as long as we stay above the 120 handle, I’m not even going to look for selling opportunities.
