The USD/JPY pair fell during the course of the session on Tuesday, but bounced enough in order to turn things back around and form a hammer. The hammer of course suggests that the market is in fact going to try a to bounce above here, and as a result a break above the top of the hammer has us buying this market and heading towards the 125 handle. We ultimately believe that pullbacks will continue to be buying opportunities in this marketplace, as the US dollar continues to outperform everything else in the currency markets.
The Bank of Japan continues to work against the value the Yen, and as a result we cannot go long of this market under any circumstances. We believe that this market should continue to be one that you can buy every time it dips, as the longer-term trend is without a doubt to the upside and should continue to be one that traders can come to again and again every time the US dollar falls as it should represent value. We believe that this market will continue to hold onto the gains over the longer term anyway, and as a result we have no interest in shorting it under any circumstances.
On top of that, we believe that the market has a significant floor in it at the 115 level, and most certainly at the 110 level. With the Federal Reserve stepping away from quantitative easing, there’s no way that we can short the US dollar, especially considering the fact that the Bank of Japan is working so feverishly against its own currency and will continue to expand monetary policy, driving down the value of that currency. This is essentially a “one-way trade”, and as a result there’s no way to think that we can fall for any significant amount of time unless we have some type of black swan event yet again. With that, we believe that this market is one that can continue to go higher over the longer term, as risk appetite continues to come back into the marketplace.