USD/JPY Forecast April 17, 2012, Technical Analysis

The USD/JPY pair fell during the Monday session as the Dollar got beaten up overall. However, the pair is starting to come close to several areas that could offer quite a bit of support, and as a result we like the idea of going long.

The first reason is that the Bank of Japan is currently working on expanding their asset purchase program, and this is akin to “printing Yen”, which of course will bring the value of the currency down overall. A second reason is that the 80 handle is a major one that saw massive support previously, then massive resistance after that – and even fought off two Bank of Japan interventions, and now should be supportive again.

The third reason is that the 200 day EMA is just below, and this will attract the trend traders as well. The 50% Fibonacci retracement level is just above the 80 handle and this brings in all of the Fibonacci traders as well. Because of this, we think that there are many different reasons for buyers to possibly step in. Although there is no bullish action currently, we are willing to step in on short time frame charts at this point as it is such an obvious place to see a reaction.

The breakout that this pair did in February was impressive, and it is hard to think that the move was a “one and done” attempt at changing things. The trend line from the financial meltdown was broken on the weekly time frame, and the moving averages all crossed over as well. Because of this, we think the move was the real deal.

However, trend changes are messy affairs, and only those that can stomach larger amounts of volatility should take this trade. As for the downside, we are very leery of selling this market until the 80 level is cleared on a daily close, and even then aren’t necessarily excited about being short as the Bank of Japan certainly has to be watching this pair at the moment, and formulating a plan to push prices back up as this market falls.

USD/JPY Forecast April 17, 2012, Technical Analysis

Written by FX Empire