The USD/JPY pair has been one that we been very bullish of for a significant amount of time now, and as you can see it has enjoyed a nice rally since the beginning of November. That being the case, the candle for the Wednesday session ended up being a shooting star right at the 105 level. This of course makes sense, as it has been resistive lately, and as a result we feel that this market should probably pullback in the short-term as the market awaits the nonfarm payrolls numbers. After all, the nonfarm payroll numbers tend to move this particular currency pair drastically at times.
The Bank of Japan continues to try and weaken the Yen, and as a result any good news out of the United States will more than likely send this pair higher. Quite frankly, that’s what we expect with our without that news given enough time. However, the market is trying to figure out whether not the Federal Reserve will be able to continue tapering off of quantitative easing, and employment was the number one concern that they had stated as far as that was concerned. If that’s the case, then expect to see the nonfarm payroll numbers creating massive amount of volatility. We believe in the longer-term uptrend, and would look at any pullback as a knee-jerk reaction to that announcement, worthy of buying on a “value” play.
With the Bank of Japan just starting it’s loose monetary policy, we believe that the value the Yen will continue to weaken against most currencies, and as the Federal Reserve is the first central bank in the G 10 economies to do any form of tightening and quite some time, we believe this is the pair that will be one of the first to react to headlines.
That being said, we believe also that the next couple of sessions will be more of a sideways grind, with the 104 level as the bottom of this consolidation area. Selling is not an option for us, we will simply wait for a supportive candle below in order to trade from a short-term direction in line with longer-term bias.
Written by FX Empire