“The Dragon”, as it is known, has seen a very negative downtrend for quite some time. We have seen the 130 level be very supportive, and we did just bounce off of it yet again. I believe that it’s only a matter of time before we break down, and as a result I’m looking for a fresh, new low that I can start shorting, or perhaps some type of exhaustion after a short-term rally. I have no interest in buying this pair, because quite frankly the Japanese yen is going to be much safer in a scenario where we don’t even know what’s going on with the British pound.
However, you have to keep an eye on the USD/JPY pair as it approaches the 100 handle. Questions will then linger as to whether or not the Bank of Japan will get involved in start intervening in the markets. If they do, there will be a bit of a “knock on effect” in this pair over here, and it could cause a significant bounce. I believe that the 140 level above is essentially the “ceiling” in this market, so a break above there would in fact be a very significant move.
In the meantime, I’m simply waiting to see whether or not we can drop from here and start reaching towards the 125 handle. Ultimately, this is a market that I have no interest in buying, but I do recognize that we could get that significant bounce. That significant bounce though should be a nice selling opportunity once the dust settles, so please keep that in mind as central bank interventions and quantitative easing measures typically only last for a short amount of time. It’s just enough to remind the markets not to get to over excited in one direction or the other. You may have to look to short-term charts, as this pair does tend to be very volatile.
