The USD/JPY pair initially tried to rally during the day on Tuesday, but just as we did on Monday, we turned right back around form a shooting star. Now that we have 2 consecutive shooting stars in a row, I feel that this market will probably fall from here but I also see that there is a significant amount of support near the 110 level, extending all the way down to the 109 level. With that being the case, I’m looking for some type of supportive candle in order to start buying again, or a break of the 2 shooting stars, both of which should attract plenty of other buying orders.
Ultimately, if we can break above the 112 level, we will be free to go much higher as this pair would probably grind towards the 115 level, an area that has been important in the past. I also see a potential stop at the 114 level, so it won’t necessarily be an easy move higher. Having said that, the grind higher has been so study that I think any pullback will find itself fighting a lot of bullish orders below. Keep in mind that this pair also tends to follow risk appetite in general, and I have 4 years look The S&P 500 and the Nikkei as barometers for what we will do in this pair. Generally speaking, the higher this pair goes, the more likely we will see the Nikkei and the S&P 500 go to the upside, and of course vice versa.
I think that the support down to the 109 level is strong enough that this should simply attract more people looking for value, and it looks a whole lot like a typical trend change in the USD/JPY pair, as it tends to be volatile and we try to turn things back around and it also tends to chop for a significant amount of time as well. Even though the markets volatile, and very rarely moves in one direction suddenly, unlike other trend changes that seem to be a little bit cleaner.