USD/JPY Forecast August 1, 2012, Technical Analysis

USD/JPY rallied during the Tuesday session, but failed in the end. The resulting daily candle is a shooting star, and as a general rule we would be very interested in selling this market. However, we see the 78 handle is a bit of a “line in the sand” that the Bank of Japan has put into this market.


It is below this level that the Bank of Japan has intervened previously, and as a result we suspect that any sustained move below 78 will get countered by the central bank. The Federal Reserve meeting later today of course could move this pair, but we believe that the Federal Reserve will do very little, and this could provide a boost for this currency pair. Without a doubt, the USD/JPY pair is one of the most sensitive when it comes to interest rates, and as the central bank is set to announce their intentions in America later today, we could get a feed on what kind of interest rate we could see going forward.

Because of the interventionist nature of the central-bank out of Japan, we are not willing to short this market at this point in time. Yes, we do see that it is a very bearish market, but then again are willing to fight a central bank just to prove a point. We would however by supportive candles in this general vicinity or lower. In fact, it is that’s exact strategy that we are looking at this pair through.

If we can break above the recent consolidation area in the neighborhood of 78.50, we think that this market could run up to the 80 handle without too many difficulties. Above 80 is the 80.60 level, which was the scene of a serious spike high recently. If we get above that, we think that 84 will be targeted before it’s all said and done. Once we get above the area this sets up a long-term buy-and-hold trade that will last for years. Needless to say, there’s a lot of hurdles to overcome in the meantime, but we do feel that eventually we will get to that long-term buy-and-hold trade.

USD/JPY Forecast August 1, 2012, Technical Analysis

Written by FX Empire