The USD/JPY pair fell significantly during the day on Tuesday, as we tested the 110.80 level below for support. We rolled over again though, and it looks as if we may try to continue to go little bit lower, perhaps reaching towards the 110 handles. I believe that area will be much more significant though, so it’s only a matter of time before the buyers return in my estimation. This is a market that is highly sensitive to risk appetite, so some type of move higher in the stock markets or maybe even the commodity markets will be necessary to see this market rally significantly. I think if we can break above to a fresh, new high, perhaps above the 111.50 level, the market should then go to the 112 level, and a break above there should send this market much higher, perhaps to the 115 handles after that.
The alternate scenario
The alternate scenario of course is a general “risk off” type of scenario that the market would find itself in, and then would send this pair down to the 110 level, and then breaking below that the 108 level. Ultimately, I believe that the buyers are probably more likely than not to return though, as stock markets are pressing significant highs in the United States. They tend to lead the rest of the world, so having said that I believe that there is value to be found in this pair. The problem of course is timing everything, so small positions might be the best way to play this market if you are looking to go long, because quite frankly are fighting the very short-term downtrend that has been so prevalent over the last several days. Longer-term, I still see a significant amount of bullish pressure underneath.
Written by FX Empire