The USD/JPY pair went back and forth during the course of the day on Tuesday, as we continue to hang above the 123.50 region. However, I believe that we are about to roll over, as we recently have broken out above the vital 122 handle. As you can see, I have marked this level on the chart, and I believe that as we drift towards that area, there should be plenty of buyers that pick this market back up and drive it to higher levels. In fact, I think a supportive candle below gives us an opportunity to take advantage of value, as the US dollar should continue to strengthen overall. Remember, the jobs number recently was stronger than anticipated, and having said that it makes sense that the US dollar should continue to strengthen in general.
Pullbacks represent value
I think it’s only a matter time before the US dollar strengthens overall, especially against other currencies such as the Japanese yen. Remember, the Bank of Japan is currently advocating massive amounts of quantitative easing, and that should push this market higher as the value of the Yen dissipates. I think the Federal Reserve is probably fairly close to having to raise interest rates, while the Bank of Japan is light years away from doing so.
The 125 handle above was massively resistive, and it is of course a large, round, psychologically significant number. With that in mind, I think the market will continue to be attracted by that level, and as a result it’s only a matter of time before we reach there. On top of that, I believe that we break above the 125 handle and continue to grind our way towards the 128 level. This is a market that should be essentially a “one-way trade”, and as a result every time it pulls back I think of the US dollar has being “on sale.”
