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USD/JPY rose during the session on Monday as the Bank of Japan is expected to add to its monetary easing policy in the near future. Because of this, we think that the 80 level is about to give way. Also, it should be noted that the range close that is very highs for the session, and as such we currently wait to see if there is an 80.50 or above daily close.
If we get that, this would be extremely bullish and have us going long of this pair because we think the next move would be 84 or so. Above 84 is a long-term buy-and-hold situation where the market goes much, much higher. It's hard to see this happen at this moment in time, but anything is possible as you know.
Because of the significance of the next 50 pips or so, we will wait until we get a daily close in order to make are trading decision. This is a significant level, so of course it won't give way quickly, and we think that the next several sessions should be vital in determining the overall trend for the next several weeks.
If we do manage to form a resistant candle at this general vicinity, we think that selling could be a good way to go until we get down to the 78 handle. However, with the extreme strength that we've seen recently, it would not surprise us to see this level give way to the buyers.
Another market that you should be watching your trading this currency pair is the treasury and Japanese bond markets. The differential between ten-year bonds of the United States and Japan tend to mimic the moves of this currency pair, and vice versa. Because of this, we need to see higher yields in the United States or lower yields Japan, and this is exactly what the Bank of Japan will attempt to accomplish later this week, in order to see this pair continue higher. We believe this eventually will be the way that things play out, but you should be aware the fact that the next leg up will certainly, with issues in the next couple of days.