The USD/JPY pair broke higher during the course of the day on Monday, as the Japanese got an opportunity to react to the better than anticipated jobs number out of America. The 103 level above will be resistive though, so having said that it would not be surprising to see a little bit of a pullback. At this point though, I think that we will probably try to reach back towards the 105 level and most certainly the Bank of Japan is very interested in the 100 level. If we were to break down below there, I feel it’s only a matter of time before the Bank of Japan get involved, as it most certainly hurts the Japanese economy to have such a strong Yen.
With this, the Bank of Japan should be known as one of the most aggressive central banks in the world when it comes to currency manipulation and getting into the Forex markets to bring down the value of its own currency. Quite frankly, right now we have a bit of a massive attempt by several countries to devalue their currencies, but very few can do it like the Japanese. With this, I believe that the Japanese yen will continue to lose value at least in the short-term, and expect quite a bit of jawboning from the central bank in Tokyo itself. I don’t know if they will get involved, as long as we stay above the 100 level. I do think that’s essentially the “line in the sand”, and I think a lot of traders know that. Because of this, they will be very skittish when it comes to holding onto shorting this market, and therefore I think a lot of people be very quick to take profits when they do short this pair. Ultimately, if we can break above the 105 level, we could continue to go much higher. I don’t know that it will happen anytime soon, but it certainly makes a nice target at this point in time as we have seen quite a bit of over aggressive selling.