USD/JPY Forecast May 4, 2012, Technical Analysis

The USD/JPY pair continued to stall on Thursday as the market consolidates around the 80 handle. The level is one of the most important ones in the Forex markets at the moment, and if today has one major pair to watch, this one is it.

The Non-Farm Payroll number comes out today in America, and it has to be one of the biggest releases in a long time. This is because of comments made by Dr. Ben Bernanke last week that suggested the Fed had other tools available if the economy started to falter again. This led a lot of market participants to think that perhaps quantitative easing was coming, and it produced a dive in the Dollar as a result. In fact, this comment overshadowed the Bank of Japan’s attempt to hurt the value of the Yen just two days later as they expanded their asset purchase program by ten trillion Yen on Friday. The program buys Japanese Government Bonds, REITS, and ETFs in a bid to “create Yen”, which of course should weaken the value overall. Unfortunately for the Bank of Japan, the markets believe that the Americans are the best when it comes to destroying the value of their own currency. This pair is essentially a race to the bottom in that sense.

The 80 handle features the site of a massive breakout in late January, and this area should be supportive as a result. The 50% Fibonacci level is just above the 80 handle as well, and the 200 day exponential moving average is just below the current action also. To further make a case for the bulls in this pair: The 52 week exponential moving average is just below as well. In other words, there are many reasons to be bullish on this pair technically. Of course, one announcement could erase all of that.

We are wildly bullish of this pair if the jobs number comes out strong today. In fact, we already have a long position, and will be adding to it if we get above the 80.50 level as it would show a real breakout in momentum. If the jobs number comes out strong, this will have the markets thinking that easing isn’t coming anytime soon, and with the Bank of Japan easing so much, this should make the Dollar more attractive than the Japanese Yen.

Naturally, the opposite is true as well. If the jobs number is weak, there is a real possibility that the market will price in further easing going forward, and as a result this pair could fall. However, the Bank of Japan is below and willing to step in from what we can tell. If that is the case – we don’t want to get in the way of a central bank intervening.

With that in mind, we really want to buy. However, the jobs number will be what drives this decision. Today is going to be huge as far as the Dollar is concerned, and this pair is probably one of the biggest markets to watch.


USD/JPY Forecast May 4, 2012, Technical Analysis

Written by FX Empire