The USD/JPY pair fell fairly significantly during the session on Wednesday, as the markets rollover towards the 123.50 handle. This is an area that has seen quite a bit of support previously, so I’m not overly surprised that it held the market up at that point. However, I also recognize that there is a significant lack of volume at the moment, as we are only in the summer season. I think that any supportive candle in this area is probably going to be a buying opportunity, because this pair should go higher given enough time.
Keep in mind that the Federal Reserve is expected to raise rates later this year, while the Bank of Japan is probably light years from doing so. With that, it’s probably only a matter of time before we break out to the upside and therefore I have no interest in selling. Even if we broke down below the 123.50 level, I think there is enough support below to start looking for buying opportunities down there as well.
Uptrend line
There is a massive uptrend line that is below as well, and I think that will eventually put a bit of a floor in this market. I believe that the ultimate support is down at the 120 handle, and is not until we break down below there I would even begin to think about selling this pair as it is so bullish in my opinion. After all, interest-rate differential expectations is without a doubt one of the biggest mover of currencies, and this is a little bit of a “perfect storm” at the moment. I believe that the pair also tends to follow risk appetite, and the fact that we sold off in the stock markets during the session on Wednesday probably only exacerbated the down moves that we ended up with. Ultimately, I think we are simply trying to build up enough momentum to finally break out and above the 125 handle for good.
