USD/JPY Forecast May 7, 2012, Technical Analysis

The USD/JPY pair fell on Friday as the US jobs data come in poor. The 115,000 jobs added certainly didn’t impress, and as a result we saw most financial markets sell off in reaction. The pair is currently in a fight to see which currency can be weakened the most, but in times when the world is nervous, they will buy both of these currencies in order to “hide”. This is why although the Yen gained nicely overall in the markets on Friday, this pair wasn’t as bearish as the other XXX/JPY crosses.

The 80 level continues to be a magnet for prices, and this session didn’t break that. The Bank of Japan is currently in the middle of expanding their asset purchase program by ten trillion Yen, and the markets are trying to figure out whether or not the Federal Reserve will continue to ease. So far, it doesn’t look like the case for quantitative easing out of Washington is going to be made convincingly. With this in mind, the pair will more than likely have an overall bias to the upside, despite the reaction on Friday.

One only has to look at the subdued nature of the fall on Friday to understand that this area may be massive support. After all, in former times when the Non-Farm Payroll came in weak, this pair plummeted. This area is more than likely being watched by the Bank of Japan, and as a result we couldn’t sell into it.

The 200 day exponential moving average is just below, and the market is in the neighborhood of the 50% Fibonacci retrace level. Both of these facts should continue to provide support for this market going forward, and it will take a serious amount of bearish pressure to get too far below. However, this can happen, and we are aware of it.

We cannot sell at this point, the Bank of Japan is certainly below and waiting. However, we like buying on a break above the 80.50 level as it would show a shift in momentum.

USD/JPY Forecast May 7, 2012, Technical Analysis

Written by FX Empire