The USD/JPY pair initially fell during the course of the day on Tuesday, but found support below the 124 level yet again. By doing so, we ended up forming a fairly positive looking candle that essentially is the same thing as a hammer. What I find interesting about this candle is it suggests that the buyers are getting more and more aggressive, and as we are approaching a Nonfarm Payroll announcement, I believe that this pair is starting to show which direction it is trying to “lean.”
The 125 level is a significant barrier, but I believe if we can get above there that the market will offer a longer-term “buy-and-hold” type of situation. I believe that you will be able to buy on dips above there, and that even though sometimes it will be volatile, it will essentially be a “one-way trade.”
Highly influenced by NFP
This pair tends to be highly influenced by the Nonfarm Payroll numbers announcement, as it can give you a general idea as to where interest rates are going to go in the United States. This is a pair that is very influenced by the 10 year interest rates, and those of course are influenced by the employment outlook in the United States. So having said that, it is all ties together quite neatly.
You can see that I have an uptrend line on this chart, and that the 120 handle is colored red. That’s because I assume that the 120 level is essentially the “bottom” of the market right now, meaning that we should not be able to break down below there. However, the uptrend line is above there, so I would assume that is essentially “worst case scenario”, as the market should continue to show buying pressure.
We know that the Federal Reserve is looking to raise rates this year, and the Bank of Japan is light years away from doing so. All things being equal – this should continue to put upward pressure on this market.
