The USD/JPY pair originally fell during the session on Tuesday, only to bounce back during the US session. The market ended up forming a hammer and the dose it just above the 79.50 level that has caused reactions in this market previously. With the Federal Reserve looking less and less likely to get involved in any significant way, there is the possibility that people will start selling the Yen in order to buy US dollars. If this is the case, with the Federal Reserve tinkering in the treasury markets, we could see a nice rally in this pair.
Obviously, we have some work to do. We currently see this pair as a “buy only” pair, and as such cannot sell it. This is because the Bank of Japan has been so feverishly working against the value of the Yen. The central bank in Tokyo has been expanding its asset purchase program by ridiculous amounts in order to devalue the Japanese currency. The only reason this hasn’t been as effective as they wanted it to be is the fact that there are people out there expecting the Federal Reserve to ease further. However, Ben Bernanke made it very clear that the Fed is currently watching the employment rate more than anything else. With this in mind, the US jobs report on the first Friday of every month will become one of the biggest and most important announcements again. Traders will trying to come up with some type of understanding based upon the numbers, and this pair will become very volatile during the sessions again.
Looking at the pair from the technical side, it is obvious to us that a move above the 80.60 level should lead to much higher levels going forward. Below us, we have an area that the Bank of Japan has been intervening in. With that being said, it’s almost impossible sell this pair. As for buying this pair, if we get the break above 80.60 on a daily close, we are willing to not only buying this pair – but hold onto the trade for some time.
Written by FX Empire