USD/JPY Forecast May 15, 2012, Technical Analysis

The USD/JPY pair struggled during the Monday session as the 80 handle continues to cause massive reactions in the pair. The level was the site of a large breakout back at the start of 2012, and the area is just now being tested for support. After all, the resistance level should by all means be support later, and we are about to find out now if this is true.

The Bank of Japan and the Federal Reserve are both on easing paths, although the amount that the Fed is doing is still up for debate. The Bank of Japan has been very active in the easing pattern as they have recently added ten trillion Yen to an asset purchase program in order to buy bonds, REITS, and ETFs in the Japanese markets. This is essentially the same as printing Yen out of thin air.

The 80 level is also right at the 50% Fibonacci level as well. This area also features the 200 day exponential average just below the recent price action which is so important to the trend traders out there. This pair should by all means have fallen by now as the global risk appetite is so poor right now. The European issues are front and center at this point, and the ability for traders to take on risks is going to be severely limited. This is probably one of the main reasons that the pair hasn’t shot straight up as under normal conditions this set up should have got almost everyone interested.

The breaking of the 80.50 level above signals to us that the market is to about to move higher, and if we get that signal we are ready to buy. The pair could move sideways for a while though, as the pair also has the Bank of Japan below and willing to get involved in this market. In fact, we are only buying this pair at this point even though there is a chance to fall. If we fall, we feel that the Bank of Japan is far too big of a threat to challenge at this point.

USD/JPY Forecast May 15, 2012, Technical Analysis

Written by FX Empire