The USD/JPY pair rose during the session on Tuesday, to show real strength off of the 78 handle yet again. It is below the 78 handle that we find the Bank of Japan, and more importantly any hopes of intervention by the bullish trader in this market. Is because of this fact that it is almost impossible to short this market presently, and as such we have gone long just above that 78 level.
Looking at the current levels that the market is trading at, it does look like the 78.75 level is roughly where the resistance comes back into play. The real question then becomes if the pattern that we are looking at now is simple consolidation leading to accumulation, or is it a bearish flag pattern? While both are still possible at this point in time, they will have very drastically different outcomes obviously.
Because of this, we think that the market should be an interesting pair to watch as it is probably the least paid attention to market out there right now. However, we do have a bit of a backstop in the form of the Japanese central bank because of the 78 level, and think that this could be one of the easier trades to take if you’re patient enough for it.
On a break above the recent highs, which we have a 78.75 we are more than willing to get aggressive about being long of this pair. As for selling, we obviously cannot do that as the Bank of Japan has intervened just below the 78 handle recently, and we do see that it is a massively supportive area. We simply do not want to run the risk of going against the central banks wishes, as there will certainly be easier trades been shorting this market.
We see the upside being capped at the 80 handle first, and then the 80.60 level. If we can get above that, we think that this market can fly all the way up to the 84 level, and perhaps even farther than that. Of course, all of those levels will have to be over, and analyze we get to them, but we could see the potential for a long-term trade here nonetheless.
Written by FX Empire