USD/JPY Forecast May 2, 2014, Technical Analysis

The USD/JPY pair initially fell during the session on Thursday, but turned that the things back around in order to form a little bit of a hammer. This hammer suggests that we are in fact going to go higher, but the range that we have been in for some time does in fact look like it’s going to hold for the time being. With that, we need to get above the recent high in order to get excited about going long, but in the end we feel that the 103 level getting cleared is a more significant move. Above there, we think that the market goes to the 104 level, and then ultimately the 105 level.

We think that pullbacks will come time and time again, and should be buying opportunities as is market should be relatively choppy, but still have a bullish underpinning. The markets continue to have buyers come into the marketplace, as this pair continues to follow the general uptrend. With that, we feel that the uptrend line below should continue to keep the market looking for reasons to go higher.

Below current levels, we see a significant amount of support at the 101.50 level. This is an area that we have seen buyers into the market again and again, and with that we are very bullish until we get below at least that level, if not even lower. We recognize that this market is going to continue to be choppy, but at the end of the day we feel that the interest rate differential will continue to expand between the two bond markets, a main driver of this currency pair. Watch the 10 year note, as the markets tend to follow the direction of higher interest rates. We believe that the United States tapering off of bond buyback programs should continue to push money towards the Americans, and away from the Japanese. On top of that, the Bank of Japan continues to work against the value of the Yen, by purchasing Japanese Government Bonds. With that, we are long-term bullish of this pair.