The USD/JPY pair had a relatively bearish session on Wednesday as it fell to the 78.20 level, but managed to bounce after that in order to form a hammer. This market still looks supported by the 78 handle in our opinion, and the Bank of Japan is certainly just below there and willing to act.
It is because of this that we are not willing to sell this market currently, and think that a breakout above the 78.60 level is what is needed to get us to go along. We think that the market could run to 80 and relatively short fashion if that happens.
Above the 80 level is the 80.60 level, and that opens up a move to the 84 handle if we can break that resistance area. Anything above the 84 level turns into a long-term buy-and-hold type situation. As for selling, there simply is no reason to do so as the Bank of Japan has been so aggressive in working against the value the Yen. We are not willing to fight with the central bank, and simply think that this latest move that we seem lately is possible accumulation.
There is the possibility that we are forming a bearish flag, and it would in fact measure down to the 76 handle. Should be noted that the 76 handle is the most recent lows, and acted almost like a brick wall that the market could get below previously. This has the hallmarks of a central bank working clandestinely and a currency pair, something that the Bank of Japan has admitted to doing in the past. Is because of this that even a break down below 78 get us interested other than to look for possible buying opportunities on supportive candles.
This will be especially true if the Federal Reserve does not ease in September like the markets are expecting. If they do not ease their monetary policy, this pair could skyrocket. However, even some monetary easing may not be enough for the market participants, and would send this pair higher as well. We simply are looking to buy support in this market, were breakout above the 78.60 level.
Written by FX Empire