Potential signal
I am a buyer here.
I would have a stop at 109, with a target of 112.30 above.
The Australian dollar initially fell against the Japanese yen, but it continues to find buyers based on the interest rate differential and the fact that Japan itself has its own set of problems. Keep in mind that as oil shortages are starting to be an issue, Japan imports 100% of its petroleum and of course is in a much more vulnerable situation than many other countries.
While Australia is not exactly an oil powerhouse, the reality is it might be easier to get crude to Australia and of course gold has supported the Australian dollar, not to mention the fact that the interest rate differential continues to favor it over the Japanese yen. The 50-day EMA sits underneath offering support right along with the 110 yen level.
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Bullish Outlook and Technical Support
I think at this point in time the trend is firmly ensconced to the upside, but I also recognize that there are a lot of concerns out there as far as geopolitics are concerned and that can lead to a little bit of a run to safety from time to time. I am bullish. I do think we will go toward the 113 yen level again, perhaps even higher than that.
This pullback, I think, is a good opportunity to take advantage of value assuming that the trend continues. I have no interest whatsoever in shorting this pair, but if we were to break down below the 108 yen level then I think some type of deeper correction finds itself into the psyche of the market.
You can even somewhat make a trendline that we have been following until recently, but really the pullback at this point is minimal when looked upon through the prism of the longer term and therefore I just don't have a lot of fear when it comes to this pair, but I do recognize that there will be volatile moves from time to time. I still favor buying.
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