The USD/JPY pair rose during the Wednesday session as the markets tried to bounce from the serious fall on Tuesday. The area that the pair is trading in at the moment is an area that has quite a bit of order clusters in it, and we see the 80 handle just below as well.
The pair recently saw a massive breakout from the 80 level, and at this point in time it still looks like it mattered. The pair has a different tone to it at the moment, as the Bank of Japan massively expanded its asset purchase program to soak up the massive amounts of Japanese Government Bonds. However, at the last meeting, we saw no mention of expanding this program even further. Because of this, the selloff continues at the moment.
The 200 day EMA is sitting at roughly the 79.40 level, and should offer support to the 80 level as well, and this should only solidify the bullish tone above it. The Federal Reserve looks very unlikely to add to the easing in the near term, so there is a real chance that this pair will rise again. Of course, it is somewhat risk sensitive, so we will need the stock markets to cooperate. With this in mind, we look as if we are going to continue to wilt a bit, and if the stock markets can pull it together – the 80 level looks even better to us as a potential buying opportunity.
The pair once went through a similar situation in ’95, and the action was very similar – choppy with wild swings. However, this is true for all trend changes, and the fact that the central bank now looks as if it is going to do whatever it can to push this pair higher, we think it will eventually succeed. However, there will be a lot of back and forth, and this is why we pick our spots very carefully. 80 is by far the best one at the moment for buying. We aren’t selling anytime soon.
Written by FX Empire