USD/JPY Forecast December 29, 2011, Technical Analysis
USD/JPY fell originally during the Wednesday session, only to pop back up and form a hammer for the day. The pair is being supported by the Bank of Japan, and the trend is currently down from the 80 level which is massive resistance. The overall shape of the market shows a triangle as well, and this bullish pattern suggests that the next move could be to the upside. If this is true, there is real resistance at 80, and the market will find itself asking serious questions the closer we get to the level. We are currently waiting to see if the 80 level gets tested, and if it fails – we would be sellers. If we can close above the 80 mark on the daily chart, we would be buyers for the long term at that point.
If the triangle breaks to the downside, this would show a “false ascending triangle”, and would be a massively bearish sign. However, we must remember that the Bank of Japan has shown it will intervene if this pair falls too low, and we know that the 75 area has seen interest by the central bank. With this in mind, any short we took based upon the breaking down of this triangle would only be for about 100 pips or so.
The demand for the Dollar looks good around the markets, so it won’t be overly surprising to see this pair finally get a boost. As stated above, the real battle is at 80, and that is where we plan on making longer-term decisions. Recently, the PM of Japan said that the present Yen levels are fairly accurate in their appraisal of the Japanese economy, suggesting that the intervention threat has somewhat cooled for the short-term.
The next few days will probably struggle to see any massive moves, but the start of January will more than likely provide a nice staging area for the move. Ultimately, there is a highly probable scenario of choppiness going forward for the next several months, but the pair is without a doubt oversold, so you never know. In the mean time, we are watching the 80 level, and the bottom of this triangle.