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The USD/JPY pair fell precipitously during the session on Thursday as the Federal Reserve announced further quantitative easing going forward. The seemingly unlimited time frame that they are willing to participate in this action has certainly put a massive amount of pressure on the US dollar overall. This would have been no different against the Japanese yen, as evident by the chart.
However, we you can see that we got a wicked snapback at the 77 handle, and this suggests that perhaps the Bank of Japan had to step been to support the market a bit. It's also very possible that the traders realize that it is only a matter time before the Bank of Japan gets involved. We certainly feel this way, and as such are still very hesitant to short despair even though the trend certainly would dictate it.
The reaction at the end of the session was fairly strong, and as such we think that there is going to be a time where you can buy this pair. However, that might be a few days as we attempt to stabilize. It'll be very interesting to see with the Bank of Japan does going forward, and as such it is very possible that they will begin some new form of bond buyback themselves.
The bottom of the market is up the 76 handle, and we think that there will be a taunt of support in that general vicinity. So because of this, it's almost as if there is a limited downside currently. While there is no technical reason to be long of this market, we presently believe that it is only a matter of time before the Bank of Japan comes in and rattles the markets. With this in mind, we are looking for supportive candles, and although we haven't seen an ideal one yet, the daily candle for Thursday does look rather interesting. In fact, it almost looks like a hammer but the body is simply too long. It certainly is telling that there is quite a bit of support below, and as such we think it's only a matter time before we can buy this pair. While there is no signal or suggestion in this particular pair at the moment, the odd reaction certainly suggests that we need to be paying attention to this market more than ever.