The USD/JPY pair fell during the course of the session on Wednesday, breaking down below the 118.50 level at one point in time. However, we turned back around to form a hammer later in the day, and as a result it looks as if the support level is trying to hold. Having said that though, the markets will have to deal with a couple of major announcements over the next couple of sessions. Begin with, after recording we will have the FOMC Meeting Minutes, and that of course can give us an idea as to what the Federal Reserve is going to do over the next several meetings. The markets are starting to focus on interest hikes, and how often they can happen, and that of course will have a great influence on the value the US dollar going forward.
The 118.50 level has been massively supportive in the past, and as a result it’s only a matter of time before we continue to go higher if it proves to be strong enough. A break above the top of the range for the day on Wednesday could be a buying opportunity as the market could very well go to the 123.50 level given enough time. However, on Friday we have to deal with the Nonfarm Payroll Numbers coming out, and that has a massive influence on this pair as well. Simply put, this is not a safe market to be trading at the moment, although technically speaking it seems to favor the upside.
A break down below the bottom of the range from the session on Wednesday could be very negative, and below the 118 level we could “open the trapdoor” and fall the way down to the 116 level given enough time. That area should be massively supportive though, as you have seen we have bounced quite drastically from there in the past. Having said that though, we need to find supporting action soon, or the uptrend could be very much in jeopardy and we could be entering a new phase when it comes to this market.