The USD/ JPY pair bounced nicely in a show of strength on Wednesday, after falling on Tuesday. The pair has recently been very bullish as the Bank of Japan announced an expansion of the bond buying program it currently does. This should flood the market with Yen, trillions of them, and this makes the action a bit more substantial than previous BoJ actions.
The action will more than likely be the beginning of the end of the massive Yen buying the market has seen over the last several years, but this won’t be an overnight phenomenon. With that in mind, we will see choppiness on the way up like we have over the last week or so. Besides, no market can go in one direction forever.
The recent breakout included several things. The breaking of the 80 mark was significant as intervention couldn’t even break it previously. The fact that it was sliced through with almost no real hesitation was our first clue at the seriousness of this move. The move also broke the pair above a massive weekly trend line from the start of the financial crisis. Both are significant moves, and likely noticed by all participants in this market. The real question is whether or not the momentum can keep building. The market certainly has come a long way in a short amount of time, but we are willing to buy this market on dips while we are above the critical 80 line. If it drops below that, things will have changed for us.
The pullbacks are going to be by far the best opportunities for traders going forward. The market needs to build up a long position on the whole, and this will take time. Because of this, we are willing to be very patient, as we feel this could be the start of a multi-month, if not multi-year move higher. Selling isn’t a thought at the moment, and certainly couldn’t be done until we get back below 80. In the meantime though, we are building a large core position from which to move forward.
Written by FX Empire