The USD/JPY pair initially fell during the Tuesday session, but as you can see bounced significantly to form a perfect hammer. I have to admit, this hammer has me very interested in going long in this pair. It doesn't matter that the Bank of Japan has a meeting on Thursday, quite frankly there isn't much of a surprise waiting for us, except perhaps the amount of monetary policy they will implement right away. There is a possibility as a result that this market gets very erratic over the next couple of days, but I think the hammer shows something that I have been talking about for quite some time: The Bank of Japan is a known entity in this marketplace, and traders are banking on them to hold the pair up.
As you can see back in February, there was a significant amount of consolidation which should now offer support. We are currently in the middle of that cluster, and the bounce off the 93 handle was convincing indeed. I also believe that no matter what happens in this pair, you simply will not be able to sell it in good faith. I have been saying for some time that any time we get a pullback in this market, it's a buying opportunity. This is not changed, and I believe a break of the top of Tuesday's candle is exactly the kind of signal that would have me throwing more money into the marketplace.
Anything's possible, including a sale on the US dollar.
Anything is possible in the Forex markets, and I believe that the pair could fall through the bottom of the hammer that was formed on Tuesday. Quite frankly, this doesn't get me discouraged, rather it gets me very interested. I believe the farther we fall, the more bullish I will begin to get in this market. I know that sooner or later the Bank of Japan will get involved, and therefore any breakdown at this point will simply be the US dollar going on “sale.” With that being said, I'm buying a break of the highs, or buying lower. There is no selling this pair right now.
