The USD/JPY pair formed a hammer during the session on Wednesday again, showing that the 101 level is indeed going to be supportive. With that, we feel that this market will show substantial support again and again. We believe that this market is going to go higher given enough time, and do believe in the longer-term uptrend.
We believe that the markets are focusing on what the Federal Reserve will do, and whether or not there is a reason to continue tapering off of quantitative easing. This of course will be greatly influenced by the job situation in the United States, something that we will get more information about on Friday as it is a massive nonfarm payroll announcement. With that, the markets may not do much between now and then, but we cannot help but notice that this week could be a monumental in the direction of this pair.
When you look at this chart, you can see that the 101 level is at the roughly 50% Fibonacci retracement level, and that the bottom of the support area near the 100 level is in fact at the 61.8% Fibonacci retracement level. Both of these are massive areas for support as so many traders are involved in Fibonacci analysis. Because of this, the fact that we have formed to hammers in a row certainly has caught our attention as well. A break of the top the hammer from either Wednesday or Tuesday, we believe that this market will probably try to reach the 102 handle, but the real move will almost certainly happen after jobs numbers come out at 8:30 AM Eastern Standard Time on Friday.
The Bank of Japan still wants to see a weaker Yen, and as a result this will essentially become a “one-way trade” if we do get US dollar strength, which of course would make this one of the easier markets to be involved in. In all honesty though, we do believe that eventually this market will reach to the 105 level over the course of the next several weeks as the uptrend continues to grind higher.