The USD/JPY pair fell initially during the session on Tuesday, as traders came back from the Easter holiday. Nonetheless, there was plenty of buying pressure underneath, and as a result the market bounced enough to form a hammer. With that, the market looks like there is plenty of buying pressure underneath in order to continue going higher, and that’s exactly we expect this market to do, grind it to the 103 level. The 103 level could be broken though, and if it does happen, we would expect to see this market head to the 104 level. Above there, the market heads to 105.
We do believe ultimately that we are going to the 105 level, and we think that this hammer is just the latest sign that there are buyers below that are willing to get involved in this market every time it falls. We think that the market will continue to be a “buy on the dips” type of market as the interest rate differential between the two currencies should continue to widen given enough time.
Any fall from here should see plenty of support at the 102 level, as well as the 101.50 level that has been massively supportive time and time again. With that, we feel very confident in the move higher in this market although we recognize that it won’t necessarily be the easiest move to hang onto at times. Nonetheless, we feel that the Japanese yen should continue to weaken overall, and although the US dollar may struggle to really bury the Yen, it will eventually happen. We are short of the Japanese yen against several other currencies such as the Turkish lira that pay higher interest rates as the swap will come into play.
All that being said, we believe that the Japanese yen will continue to struggle longer-term, and that anytime it strengthens will be an opportunity to sell it. The Japanese central bank should continue to work against the value of the Yen, so we feel fairly confident and sure of ourselves buying currencies against the Yen.