The USD/JPY currency pair had a bearish session on Monday as the “risk off” trade came into play. This would have been set off by the poor retail sales number coming out United States, and as such the dollar lost its luster against other “safe” currencies such as the Yen.
The pair is still within the consolidation range though, which we see from 78 to the 80 level. The 79 handle is support as well, and we believe that all the way down below from where we are right now there will be supportive levels as the Bank of Japan has been working so hard against the value of the Yen. It is because of this, that we simply will not buy the yen under any circumstances. With this being said, it is only a matter time before the Bank of Japan either opens its mouth, or flat-out steps in.
At this point in time, we are willing to buy supportive candles and would even do so on shorter time frames. We think this pair will continue to bounce around within the recent consolidation zone, and think that the 78 level will be where the Bank of Japan absolutely cannot let the pair go below. With this in mind, we are aware of the fact that this could be a longer-term trade, as things can bounce around for a considerable amount of time and as such patients will be needed.
Breaking above the 80 handle is the first signal that we would have for longer-term uptrend coming into play. Once we get above the 80.60 level, this would be a new leg up for the pair, and we think that he could run all the way to 84. Certainly, at this point in time there is much more risk to the upside in this pair then down.
It is because of all the reasons above that we are looking for supportive short-term candles. We will only buying this pair, and will not sell it as we do not make a habit of fighting against central banks.
Written by FX Empire