The USD/JPY pair fell significantly during the course of the session on Thursday as traders started focusing on the Christmas holiday. Quite frankly, this is a market that has more than enough support below to keep this market somewhat afloat. The market has a massive amount of support all the way down to the 118.50 level, and it is not until we break down below there that I feel you can sell this pair. On top of that, there are lot of reasons the think that the US dollar will continue to go higher over the longer term anyway, so at this point I’m in a bit of a “wait and see” type of mood.
Some type of supportive candle in this area would be great, because it shows that the buyers are still there, so the market should continue to go much higher. I believe that a hammer or some type of impulsive green candle would be excellent for buyers to get involved, as it would show that momentum has picked up.
Simply Waiting
I'm actually waiting at the moment, but do have designs on buying sooner or later. Quite frankly, the two central banks are on opposite sides. The Federal Reserve will raise interest rates again, and have recently done so, while the Bank of Japan is years away from doing so, and quite known for being very loose with monetary policy anyway. This just simply gives the Japanese more Keynesian excuses for loose money, which of course is absolutely horrible for a country's currency. It is only a matter time before this market bounces, and at this point in time I think that every time we pullback and show signs of support, you have to be thinking about the US dollar being on sale.
It is not until we break down below the 118.50 level that I would even consider selling, and even then I don’t know that I would sell the US dollar against the Yen. I might actually use other currency pairs to start buying Yen, but at this point in time I think that’s very unlikely to happen.
