USD/JPY Forecast August 19, 2013, Technical Analysis

The USD/JPY pair rose during the session on Friday, but as you can see it was an overly impressive move. We ended up closing the market roughly 97.50, and as a result we are essentially at a “flip” in the marketplace. This is an area where price have seen support previously, and now could possibly see resistance. However, in the end we still believe that this market has legs to the upside given the right set of circumstances.

The Bank of Japan will continue to work against the value of the Yen, and certainly nothing has changed that. There still buying bonds in Japan, which of course devalues their currency anyways as the interest rate differential widens between the US and Japan. The 10 year notes tend to be especially influential in this currency pair, so pay attention to the interest rate differential there.

The world worries about the Federal Reserve and what they’re going to do during the month of September or October, and especially when it comes to whether or not they will taper off of quantitative easing. If they were to do that, it would make the value the US dollar skyrocket, and this pair would be especially sensitive to that move, making it one of the “buys of the century.”

We believe that ultimately this pair will continue to go higher, but it is simply grinding its way south at the moment simply because of the lack of liquidity in the marketplace and the uncertainty surrounding the Federal Reserve at the moment. However, even if the Federal Reserve does hold off on tapering away from quantitative easing, they are getting to the point where it is becoming more and more necessary to think about that. In other words, this market will eventually have that move going forward that shoots the US dollar much higher. The real question is whether or not it’s going to happen soon, or is going to be months down the road. Nonetheless, we are not sellers because we know that it’s only a matter time before the Bank of Japan start rattling everybody’s cages.


USD/JPY Forecast August 19, 2013, Technical Analysis

Written by FX Empire