The USD/JPY pair initially fell during the course of the session on Tuesday, testing the 123 round number. I doing so, we found enough buyers below to turn things back around and form a bit of a hammer. The hammer of course is a very bullish sign, and the fact that it is on top of the recent consolidation suggests that the market is going to continue to go higher. If we can break above the top of the range from the previous session we are buyers as the market should then head towards the 125 handle. If we can break above the 125 handle, we feel that this market continues to go much higher
However, the fact that we formed a hammer after initially falling suggests that there are buyers below. With that, we believe that there is support all the way down to the trend line that has been so supportive for quite some time. That being the case, the market should continue to find buyers again and again, and on top of that we cannot help but know that the market is fundamentally driven by risk appetite as well.
With that being the case, it makes sense that this pair continues to rise in general as the Greeks are voting to capitulate against the demands of the creditors in the European Union. That being the case, the market looks as if it is going to reward risk appetite now, and that of course means that the Japanese yen will get sold off. Keep in mind that the US dollar is being supported by the perception that the Federal Reserve is going to raise interest rates fairly soon, and of course the Bank of Japan is nowhere near doing so as quantitative easing will probably be the norm in Tokyo for years to come. With that being the case, you have to keep in mind that bond yields will favor the Americans, which of course favors this pair going higher over the long-term all things being equal. We are buyers and not sellers.