USD/JPY has been a fairly quiet market lately, and for those that would take the time to understand the driving factors this wouldn’t be much of a surprise. The most important thing to think about in the market is the relationships of the central banks involved and the markets. The Federal Reserve is one of the most efficient central banks out there as far as killing off the value of its currency, and the Bank of Japan is a close second historically. However, as the markets have been in a “risk on, risk off” mode for several years now, this pair has been one that at times gets to be very difficult to trade.
The Bank of Japan desperately wants this pair to rise, and the value of the Yen is wreaking havoc on the Japanese economy as exports are too expensive to remain as competitive as they once were. The central bank has been known to intervene, and has also been jawboning the value of the Yen down, pushing this pair higher.
On the other hand, there is a ton of speculation these days that the Federal Reserve will work to ease monetary policy, bringing down the value of the US dollar. The truth is that the Fed hasn’t explicitly stated that they were going to ease, but just the possibility has people leery of betting for a Dollar appreciation against the Yen, one of the few “safer” assets in the world than the Dollar.
80 and above
As far as I am concerned, the 80 mark in this pair will be crucial for both sides. As long as the market is below that level, I feel the bears are in control. However, I am not willing to sell this pair as the BoJ could send the pair back up on a whim. I would rather buy this pair, and once the area around the 80 level is cleared on a daily close, I am willing to buy. For me, the trigger price is actually the 80.75 mark as this would show a significant break through resistance.
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