The USD/JPY pair broke higher during the course of the session on Thursday, clearing the 120 handle. However, with the nonfarm payroll numbers coming out today, it’s very likely that the market should continue to tread water between now and then. This market tends to be very sensitive to that economic announcement, and the better than the numbers come out, the higher, this pair will go. It is anticipated that the United States added 240,000 jobs during the month of February, and anything better than that should send this market much higher. Pullbacks should be thought of as potential value in a market that is most certainly bullish overall.
After all, we saw quite a bit of support at the 118 handle, as the most recent low was higher than the one before it. This pair tends to benefit from risk appetite overall, as the Japanese yen is considered to be a “funding currency”, which means that a lot of loans are taking out in Japan. Because of the low interest rates, and then used to finance investment in higher yielding currencies and economies. With that, money leads Japan when times are good, and heads back to it when times are bad. The jobs number of course is one of the strongest indicators of how things are, as the US is the largest consumer of global trade in the world.
Even if we pullback from here, we think that will simply end up being a nice buying opportunity on signs of support, so therefore we have no interest whatsoever in selling this market and realize that it is essentially a be thought of as value in the US dollar. If we do pullback, simply because it is the favored currency around the world. You see this, and various other pairs, and this is a pair that will be any different in our opinion. In fact, we believe that the market will break above the 122 handle, and then head to the 125 level given enough time. After that, it’s the next leg higher, and we will continue a multi-year uptrend.