The USD/JPY pair had a slightly bullish session on Thursday as we had suspected consolidation to be the next move. So far, this is coming true. However, we still feel that the real risks could be to the upside long-term, and we also know that the Bank of Japan has been active below the area we are currently trading in. Because of this, we have a “buy only” attitude when it comes to this pair.
The 200 day exponential moving average is just above, but it appears the market is using a wider band for it than the simple line. In fact, we feel that this is the main driver for the 80 to 79 consolidation zone at the moment. The candle itself for Thursday wasn’t all that impressive, and looks as if the pair is ready to settle down into a bit of quiet trading.
The Friday session will more than likely be very quiet in the US afternoon as the Americans are getting ready for the Memorial Day weekend, a time when you will find people at gatherings instead of trading terminals. Because of this, we think that by the time you get to the noon hour in New York, the action will all but stop.
The move in Europe will be the real action, and we think that there isn’t much on the horizon that would push the pair through either level mentioned above. Because of this, we are essentially avoiding any trades in this pair today as there is unlikely to be any rush in either direction. Certainly nothing that can’t wait until Monday.
The Bank of Japan failed to come up with any additional easing this past week, and there is a chance that the markets will try to push the issue with the BoJ, but intervention will be a real threat below the 79 level, although probably not right away. We prefer to go long because of this, but will need to see a daily close above the recent highs, at roughly the 80.60 level as it would show momentum building for the bulls.