- The USD/JPY currency pair initially pulled back Wednesday but found enough buyers underneath to turn this market around.
- We broke above the ¥134 level, a sign of strength.
- At this point, it looks very likely that the market will continue to favor the upside, but the 50-day EMA could cause a little bit of trouble.
Pair Likely to Remain Bullish
That being said, the market has been in a bullish run for quite some time, despite the fact that we had a nice little pullback. Part of what had happened was interest rates started to drop around the world, thereby putting less pressure on the Bank of Japan to buy unlimited bonds in order to keep interest rates at the 0.25% level that they wanted for the 10 year JGB. Regardless, we were in an uptrend and that eventually sorts itself out, as we have seen over the last couple of days.
The momentum of a Forex pair takes quite some time to turn around, so I think it only makes sense that we would continue to see a lot of bullish behavior given enough time because people will be looking at this as an opportunity to pick up “cheap US dollars.” In fact, it does make a certain amount of sense that we bottomed at the ¥132.50 level because it was an area that had resistance built into it previously. Market memory comes into the picture, so the fact that we bounce from that area only adds to the longer-term bullish behavior of this market. Given enough time, I think we can looking to the 130 section level, possibly behind again. Keep in mind that we pulled back from a significant barrier in the form of the ¥140 level, and with the jobs number coming out on Friday, that might be the catalyst to continue pushing towards that level.
Alternately, if we were to break down below the lows of the Tuesday session, it might open up a move down to the ¥128 region, which is an area that had been important previously as well. A breakdown below that level could be catastrophic for this market, opening up the pair for a significant flush lower. In that scenario, we have to be very concerned about the trend itself, but that does not look very likely to happen.
Ready to trade our Forex daily analysis and predictions? Here are the best Forex brokers to choose from.