The USD/JPY pair had a relatively quiet session on Wednesday as the markets continue to measure the likelihood of more easing coming out of the Federal Reserve. The Bank of Japan is certainly in an easing mode, and because of this, any lack of easing in the United States could actually send this pair much higher. In fact, in the long run, we think this is what will happen.
However, the current market action leaves a bit to be desired. It is highly likely that any easing will wait until after the Greek elections at all central banks as the wrong result in that country could send the market into a massive shock. The Japanese have also intervened a couple of times just below the current levels, so the threat of further intervention keeps us from selling this pair at these levels. Because of this, it is a “buy only” pair for us, and we simply aren’t interested in shorting.
The last several sessions have shown that the market is simply waiting – or it at least appears as such. The 80 level above is the epicenter of a massive resistance area for our money, and the market will have to break above that resistance zone for us to buy this pair. The top of the “zone” is the 80.50 level or so and as a result a daily close above that area will have us buying and holding for what we think could be a longer term move.
The Bank of Japan members have been jawboning the value of the Yen lately, and this shows that the central bank is paying attention to this pair again. This should fill in one side of the equation for us, and now it is a matter of what the Fed will do. If the Fed eases, there is a real chance that the pair will fall apart and force the Bank of Japan to eventually intervene. Because of all of these factors, we find this pair simply easier to buy on a break of the top of resistance.
Written by FX Empire