The USD/JPY pair initially fell during the course of the day on Tuesday, but turned back around to form a bit of a hammer. The hammer of course suggests that the market is ready to go higher, but we also recognize that the Bank of Japan has a Monetary Policy Statement coming out today, so we could have a bit of volatility going forward. After that, we have the FOMC Meeting Minutes as well, so expect a lot of volatility later as well. This is a pair that is highly influenced by the 10 year treasury markets of both countries.
If we pullback from here, we do believe that there is enough support to push this market higher over the longer term anyway, so quite frankly we are not looking for selling opportunities at this point in time. Quite frankly, about the only thing that could change that would of course be if the Bank of Japan suddenly started raising interest rates, which is extraordinarily unlikely.
Ultimately, we think that pullbacks from here should be thought of as value in the greenback, and we will have to take advantage of that value as the market would be “cheap.” With this, the market continues offer buying opportunities again and again, and we are now essentially in the mindset of “buying on the dips.” We think that will be the case longer term as well, so having said that we feel it is only a matter of time before the market tries to get back to the 125 level, as it is the recent high, but it also is a massive resistance barrier. Ultimately though, we feel it is only a matter time before we break out above there and the longer-term uptrend continues to be the way going forward.
There is a massive amount of support at the 122 handle as far as we can see, as it was the previous resistance based upon the consolidation that we had been stuck in for quite some time. We now believe that the market is gearing itself up for the move to 130.