The USD/JPY pair has been somewhat sideways during the day on Monday, as we continue to try to build up enough momentum to drive higher and finally break above the psychologically important 112 level. The 112 level should be the gateway to the 114 handle. That was the previous consolidation area that the market had been in, so it would make sense that we revisit that area. Having said that, this is a very risk sensitive market, and this being the case it’s likely that the markets will continue to pay attention to stock markets and futures markets of course in pricing this pair. If we can break above the 112 level, I would be a buyer but in the meantime, I think short-term buying on the dips will more than likely be the best way to trade this market.
On the other hand, if we break down below the 111 level, we then will probably drop to the 110 level underneath which has been supportive in the past. The market should continue to find quite a bit of support in that area, as it would be a continuation of the consolidation area that we had been in previously. Nonetheless, the market has looked very bullish as of late, so I think we have more buying pressure than anything else. Pay attention to the bond markets as well, and as long as the US interest rates continue to rise slightly, that should push this pair higher as the Bank of Japan continues to have a very loose monetary policy. There is nothing on this chart that looks like it’s going to be easy to trade, but I do think that a break above 112 would be rather encouraging to the buyers going forward.
Written by FX Empire