The USD/JPY pair broke higher during the course of the session on Wednesday as we continue to grind and wait to the upside. After all, the market should continue to go higher based upon the fact that the industry differential between the 2 countries should continue to expand. This will reach a bit of a fever pitch on Friday as we have the Nonfarm Payroll Numbers coming out, and that of course has a massive effect on this a currency pair. I believe that we will try to reach towards the 125 handle given enough time, but recognize it somewhere near the 124 level we have a significant amount of resistance.
If we can break above there, the market will try the 125 handle. If we can get above there, it becomes more or less a longer-term “buy-and-hold” type of situation that I would be more than willing to jump on. I think that the market will offer plenty of buying opportunities on pullbacks as well, so given enough time I think that I will find myself long of the USD/JPY pair regardless.
Floor in the Market
I believe that there is a floor in this market, somewhere close to the 122 handle. Even if we broke down below there I think that the 121 and 120 handle would be supportive as well. Quite frankly, I feel that the Bank of Japan will continue to add stimulus to the Japanese economy which of course brings down the value of the Japanese yen as bonds offer almost no return.
On the other side of the Pacific, you have the Federal Reserve which looks very likely to have to raise rates, especially if the jobs number is strong on Friday. Because of this, I feel that this is essentially going to be a “one-way trade” and most market participant seem to know this at the moment.
