The USD/JPY pair went back and forth during the course of the session on Wednesday, ultimately forming a bit of a shooting star. Having said that though, the market looks as if it is still very bullish overall, so although this is an exhaustive candle, we believe that eventually we will find buying opportunities going forward as the recent breakout was so strong. Remember, the recent breakout was due to the fact that the Nonfarm Payroll numbers came out much stronger than anticipated last Friday, and that of course is a heavy influence on this currency pair in general. The better that number does, the better this particular currency pair tends to perform.
This of course is due to the interest-rate differential that you see in the 2 markets, as the Federal Reserve is much likelier to start raising interest rates in the near term as opposed to the Bank of Japan which seems to be light years away from doing so. With that being the case, it makes sense that more money will flow into the US than Japan as money tends to go where it’s treated matter.
Pullbacks are buying opportunities as far as we can see, and the 122 level below should essentially be the “floor” of this market as it recently broke above that area after it had been so resistive. It was a break above and out of the recent consolidation area that the market has been stuck in for some time, and things like that don’t happen every day. Now that we have broken out to the upside in shown extreme and momentum to go higher, it makes sense that we need a pullback in order to pick up enough buyers to increase the momentum. We still believe that the market is reaching towards the 125 handle over the longer term, and would not be surprise at all if we broke above there as well. We have absolutely no interest whatsoever in selling this pair as the bullish momentum is so strong at this moment in time.