The USD/JPY pair shot higher during the session on Friday, but as you can see pulled back to give most of the gains away. The resulting candle is a little bit of the shooting star, but at the end of the day we don’t believe that this pair can be sold. We are longer-term bullish of this pair anyway, and the fact that the nonfarm payroll numbers came out better than anticipated tells us that the interest-rate differential between these two economies should continue to expand. With that, we do believe that the market will continue to go higher although we could get a slight pullback in this moment.
Any pullback will find support near the 102.50 level though, and with that feel that buying a supportive candle closer to that level is probably the way to go. The supportive candles in that general vicinity would be used as buying opportunities, as the market should head towards the 105 level given enough time, as we have been saying for some time now. We have essentially just broken out of a complex “W pattern”, and as a result we think that plenty of buying pressure will continue to enter the market.
At the 105 level, we would expect to see some type of resistance. However, longer-term we’re still aiming for the 110 level, so any pullback at the 105 level should more than likely offer a nice buying opportunity as well. We believe that this is the type of market that you can go to time and time again, as it continues to offer buying opportunities over the long run. Selling is an absolute impossibility because of the underlying fundamentals, and the fact that the Bank of Japan is working so hard to devalue the Yen anyway. They will eventually get their way, and as a result we believe that the Federal Reserve tapering off of quantitative easing will continue to pushes market higher and higher over the next several months, if not years as this pair does tend to trend for very long periods of time.