USD Gives Back Strength Against JPY

I do not have any interest whatsoever in trying to short this market anytime soon.

• The USD/JPY pair initially tried to rally Friday but then fell rather significantly.
• By doing so, the market has broken below the ¥136 level during the trading session.
• This is a market that should continue to be bullish in the longer-term, due to the fact that the Bank of Japan continues to buy unlimited government bonds. This is the same thing as quantitative easing, and it makes quite a bit of sense that we would see the Japanese yen weaken over the longer term.

Looking at the start, the 50-day EMA is sitting closer to the 133 in level, I think it’s worth paying close attention to as it is rising. The 50-day EMA is more than likely going to continue to see a lot of noisy behavior due to the fact that the indicator is so popular. Even if we break down below the 50-day EMA, the market is likely to look to the ¥132 level as support. This is an area where we have seen quite a bit of momentum jump back into the market. Even below there, the ¥128 level is very likely to be important.

Pullback May Offer Value

That being said, we could turn around right away, but I think that’s the least likely of scenarios. Considering that the market has been so relentless to the upside, it does make a certain amount of sense that we have a bit of a pullback. That pullback should offer value and that’s how I will be looking at this market. It’ll be interesting to see how this plays out next week, due to the fact that the Federal Reserve has a meeting on Wednesday.

We have seen a lot of back and forth as to whether or not the Federal Reserve is going to raise by 75 basis points, or if they are going to go for 100. Beyond that, we also need to look at the idea of whether or not the market is going to get a very hawkish statement. Because of this, I think that given enough time we will find a return to the upside, so we need to see some type of supportive candlestick in order to get long. I do not have any interest whatsoever in trying to short this market anytime soon.

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