The USD/JPY pair spent most of the day grinding higher, as Thursday was relatively bullish. We bounced off of the 111.50 level, an area that is offering support, but I also see a significant amount of resistance around the 112.20 level. It’s not until we break out to a fresh, new high that I would be comfortable buying, because we could find ourselves stuck in consolidation, and that will tie up money that could otherwise be used for more active markets. However, if you are nimble and quick enough, this could present a nice range bound trading opportunity for those of you who employ those types of strategies.
This pair of course is driven quite a bit by risk appetite, as the Japanese yen is considered to be the ultimate “safety currency.” As long as that’s the case, there is always going to be a bit of a risk to the downside, mainly because of geopolitical concerns and questions about demand globally. I still believe in the uptrend though, so waiting for a breakout above the recent high might be the best way to go. If we did breakdown below the 111 level, I would be looking to sell, perhaps reaching down to the 111 level. However, that would have to be accompanied by a general selloff of risk appetite around the world, perhaps seen in stock markets and commodities markets. Typically, when this pair sells off it is rather obvious that risk appetite has fallen apart. So with that, pay attention to other markets if you do plan on trading this currency pair. The pair tends to be somewhat volatile, so keep that in mind as well, as younger and less experienced traders tend to get shaken out quite rapidly.
Written by FX Empire