USD/JPY forecast for the week of October 20, 2014, Technical Analysis

The USD/JPY pair fell significantly during the course of the previous week, but found the 105 level to be supportive enough to turn the market back around and form a massive hammer. This hammer of course as you can see is a very positive turn of events, as the 105 level was in fact a significant point of breakout. The 105 level previously was very resistive, and the fact that we have now come back to test that area and form a hammer tells us that the market is going to go higher given enough time. This is will we believe anyway, and it appears now that we will test the 110 level given enough time as well.

On a break of the top of that hammer, we would be a buyer, just as we would buy pullbacks and show signs of support on shorter-term charts as well. Quite frankly, the reaction that we’ve seen at the 105 level tells us that the market should continue to go and find buyers in that general area as it is obviously an area of great interest by the bullish traders out there.

Once we do get above the 110 level, the market should then head to the 115 level given enough time, but we believe that the market will continue to offer buying opportunities as we pullback, and we will essentially “buy on the dips” all the way through the rest of the year, quite frankly farther than that we believe. In fact, we believe that this is the beginning of a multi-year uptrend that should continue to offer plenty of profitable opportunities as we had seen for several years before the financial meltdown.

The candle shaped is just about perfect, so we really do like the idea of buying at this point. We believe that one 10 will of course offer resistance again, but ultimately this pair will break out to the upside and should continue to go much higher. We find it very difficult to imagine breaking down below the 105 level, and we believe that there are plenty buyers below that area to keep that from being realized.