The USD/JPY pair fell initially on a gap lower at the open on Monday, but as you can see filled that gap during the rest of the day. That being the case, the campus now filled and you have to ask whether or not it’s going to continue higher? However, you can look at this market overall and recognize the fact that we are forming some type of wedge at this point, which is completely symmetrical. This tells us that the market could go either way, but we feel that a significant move is probably coming fairly soon.
The Bank of Japan continues to work against the value the Yen, just as the Federal Reserve failed to taper off of quantitative easing. Because of this, we feel that the market should eventually make some type of the session, but in the meantime we feel that a lot of volatility is going to be the case. However, with this type of massive wedge, you have the potential of a significant move coming fairly soon.
If we managed to break above the 100 level, we feel that this market would without a doubt be bullish, and probably heading towards the 105 level. That of course has us bullish, just as a break of the bottom of this wedge would have us thinking bearish. However, we deftly are more comfortable going long in this market simply because of the fact that the Bank of Japan will press the issue given enough time.
Ultimately, we do think that the Federal Reserve will have to taper off of quantitative easing sooner or later. Expect the nonfarm payroll report on Friday to cause the markets to move massively, and this pair of course will be one of the most affected. After all, this is a market that is influenced by two central banks are trying to keep their currencies week, and any sign that the Federal Reserve may have to taper, which of course is going to be highly dependent on employment, would have the US dollar skyrocketed against the Japanese yen. In the meantime, we do not expect a breakout in the next couple of days.
Written by FX Empire