The USD/JPY pair did exactly what I would expect it not to do during the day on Thursday, dropping down and then finding plenty of support. We have broken above the 110 level, and it now looks likely to offer a bit of support. If we can break above the 110.50 level, I think that the uptrend that we had formed over the last couple of sessions will continue. Alternately, if we close below the 110 level on the daily chart, the market should continue to go lower. I think we will continue to see a lot of noise and volatility in this pair, because it is so rest sensitive and of course there are a lot of reasons to be concerned by traders around the world.
I believe that you have to be careful in this market, unless of course you are a longer-term trader. The market still goes higher over the longer term as far as I believe, but we could drop as low as 108 between now and then. Small positions will probably be necessary for the market, as the volatility will remain high. There is a lot of fear on Wall Street about the current valuations of the stock indices, so they fall that could put pressure on the USD/JPY pair. Nonetheless, I think that would be a pullback and not some type of trend change, so I think that given enough time there will be value reintroduced into the pair. I say the same thing about the stock indices, so therefore I am bullish of both longer-term, but recognize that we are still susceptible to pullbacks in both of those markets. However, this is a market that can turn on a dime, and that only adds more credence to the idea of a smaller position.
Written by FX Empire