The USD/JPY pair went back and forth during the session on Thursday, essentially ending the day doing nothing. We formed a massively neutral candle, and got nowhere in the end. This is an acute surprise though, as the 99 level has been rather supportive over the past several months from time to time, as well as resistance. A basic tenet of technical analysis is “market memory”, and we believe that with shown in this chart at the moment.
Because of this, we feel that this market will more than likely offer a buying opportunity fairly soon, but we have to be assured to find the right supportive candle, or perhaps a move over the 100 level which of course is very significant and the fact that it is the biggest of the “large round psychologically significant numbers.”
We still see the 99 level as important as well, and because of that we think that it makes sense that buyers would step in at this point. After all, even if the Federal Reserve is looking to possibly delay the tapering of quantitative easing, the fact is that the Bank of Japan continues to be one of the easiest central banks around the world, and will absolutely pummeled the Yen if it needs to. This is been shown time and time again over the last several years, as the Japanese central bank is one of the most aggressive central banks out there as far as intervention, bond buying, and stepping into its own financial markets in order to drive down the cost of borrowing money.
We will have to pay attention to the 10 year notes in both the United States and Japan, as that seems to be one of the main drivers of this pair. As long as the interest rate differential favors the Americans, expect this pair to gradually go higher. However, with all of the uncertainty that we’ve seen, it’s not exactly surprising to see that this market doesn’t want to make some type of clean shot in either direction. We are looking for supportive candles, or a break above that 100 level on a daily close in order to start buying again.
Written by FX Empire