The USD/JPY pair broke down during the course of the session on Friday as the jobs number came out stronger than anticipated. Because of this, we feel that breaking above the 125 level is of course a very strong sign, and with that we feel that the market is more or less a “buy-and-hold” type of situation, and that pullbacks should be buying opportunities. There is a significant amount of support just below, as we have been going back and forth for some time.
We think that the support extends all the way down to the 124 level, and actually just a little bit below there. With this, and the move higher it makes sense that you can only buying this pair, and that’s exactly how we are going to play it. We think the pullbacks are distantly going to be value in the US dollar as the Federal Reserve has yet another reason to think about raising interest rates this year as the jobs number came out so strong.
Keep in mind, the Bank of Japan on the other side the Pacific Ocean will continue to liquefy the markets and by a Japanese Government Bonds, which drives down the value of the Yen in general. With this, it makes sense that the Bank of Japan will finally get what it wants, and that of course is a much higher US dollar against the Japanese yen. With this, we are buyers as we think that this is a market that is well supported and there are plenty of reasons for the market to continue going higher.
The 125 level is of course a large, round, psychologically significant number, and breaking above there is of course a good sign. Ultimately, we believe that this market goes to the 130 level, which is the next large, round, psychologically significant number. It isn’t necessarily going to happen today, but we do believe that it is a longer-term target as the market should continue to find buyers every time it dips. We are extraordinarily bullish of this pair.