USD/JPY Forecast December 4, 2012, Technical Analysis

The USD/JPY pair fell during the session on Monday as the 82.50 level continues to offer significant resistance. However, we do know that this market is well supported somewhere around the 82 handle, and the Bank of Japan is actively working against the value the Yen. Adding to the pressure on the Bank of Japan is the fact that the opposition leader Mr. Abe looks very likely to be elected in the near-term.

Mr. Abe has stated publicly that he believes that the Bank of Japan should print “unlimited Yen” in order to fight the value of the Japanese currency. Quite frankly, it is an export nation and they need the exports that can be garnered by having a cheap currency. The current levels in this pair simply are strangling the Japanese economy because the products are becoming far too expensive for the average American to buy at times.

Because of this, we do think that the Bank of Japan will act again and again going forward and essentially killed the Yen. While they have attempted various interventions and the like recently, this is a departure in the sense that it is not a “one-time shot.” In fact, this will become a longer-term policy decision that should continue to propel this pair higher.

Look at this chart, we do see that the 80 handle is rather significant and should be a bit of a “floor” in the market right now. It is hard to believe that the market will fall below that level without attracting the attention of the Bank of Japan, and whatever intervention policies they may have. We also know that the Bank of Japan is looking to buy assets as a form of quantitative easing, and as such we think that the value of this pair will be higher overtime.

The 84 level is significant resistance. If we can get above that level, this becomes a buy-and-hold situation rapidly. We could see prices as high as 95 in the short-term, but we also believe that 100 would be a realistic target over the next year or two. Because of this, it becomes a long-term trade above 84.


USD/JPY Forecast December 4, 2012, Technical Analysis

Written by FX Empire