USD/JPY Forecast April 10, 2012, Technical Analysis

The USD/JPY pair rose during the Monday session as the bottom of the recent down trending channel has held as support. Also, the 81 handle came into play, and it appears that the pair is still finding support in general, even with the massive selloff lately.

The Bank of Japan will be ending their meeting after the session, so it could bring some more easing to go with it. Perhaps this is part of the reason that the pair found support on Monday. The pair has recently reacted to the fact that the Bank of Japan is working so diligently to weakening the Yen. The pair is also starting to look as if it is trying to form a bullish flag as well.

The suggested move on a breakout of the potential flag is to the 90 level, which would make sense as there is a natural inclination for market to find these 500 pip levels. The trend looks to be changing to the upside, and the recent action should only be a pullback in the bigger scheme of things.

The pair has been a great pair to buy and hold over the years for carry trades, and although the interest rates in the US are so low, this pair does in fact pay a positive swap. The pair is affected by the stock markets, and will more often follow the same trajectory as the S&P500. The pair is currently falling into larger support area as the pair has seen a larger cluster of buy orders between the 81 and 80 levels. In fact, we see the 80 level as a bit of a “line in the sand” for the bulls. As long as we can stay above that area, we consider the recent breakout to still be valid.

We are willing to buy pullbacks, and in fact are adding to our positions at the end of the session as the pair is starting to look like it is waking up again. The bulls will more than likely come back into the market, and as a result we think that the longer term trade is still to the upside.

USD/JPY Forecast April 10, 2012, Technical Analysis

Written by FX Empire