USD/JPY Forecast October 24, 2014, Technical Analysis

The USD/JPY pair did in fact break above the 107.50 level during the session on Thursday, which was the signal that we had been waiting on in order to start buying again. Now that we’ve had that happen, it appears that we are all that destined to go to the 110 level, an area that we believe will continue to attract traders anyway. After all, it was the most recent high and there are multiple reasons not to the Japanese yen at this point in time, while the US dollar should continue to strengthen overall for several other reasons.

We believe that the Federal Reserve may not necessarily raise rates anytime soon but the truth of the matter is that they are getting out of the quantitative easing game while so many of the other world’s central banks will continue to expand monetary policy, driving down the value of their own currencies. In that environment, it makes sense that the US dollar would continue to strengthen against most other currencies, and the Japanese yen of course would be no different. After all, the Japanese central bank is very aggressive in the way it has been handling its own interest-rate situation, and with that it makes perfect sense that we have this particular move.

We do recognize that the 109 level does offer a little bit of resistance, but at the end of the day we believe dips will continue to be buying opportunities as it would represent “value” in the US dollar. We also believe that the 105 level is without a doubt a bit of a “floor” in this marketplace, as it was the site of a significant breakout and has been tested for support recently. Now that we had bounced from that area, we are fairly confident that we will test the 110 level again, but ultimately could break above there and head towards the 115 level by the time we finish and close out this year. We have no scenario in which we sell this pair at the moment, and quite frankly aren’t even looking for one.