Continues to Hang Around the Same Level

On the upside, if we were to break above the ¥132 level, or perhaps more specifically the candle from last Wednesday after the Bank of Japan decided to reiterate its desire for yield curve control, then I think the US dollar starts to take off against the yen. 

• The USD/JPY has gone back and forth during the trading session on Thursday as we continue to hang around the ¥130 level.
• This is an area that’s been important multiple times, so I think it does make a certain amount of sense that we would see this as a situation where we’re trying to figure out where we are going for the bigger move.
• After all, we have recently heard the Bank of Japan tell us that it is going to stick with the 50-basis point ceiling in the 10-year note, and therefore it’s likely that we will continue to see the markets move based upon what’s going on in the bond market.

If we see yields rise worldwide, the theory of course is that the Bank of Japan will have to print yen to buy a ton of bonds. That’s essentially what caused the major melt-up as we saw this last year and is still a very real possibility at this point. A lot of psychology is attached to it, but at the end of the day, we also must pay close attention to the ¥127 level underneath, which is a major swing point. Breaking down below that level opens a huge “air pocket” that we would then have to deal with. The market would then be in a freefall, therefore that will have me getting aggressively short again.

We are at a Major Crossroads at this Point

However, we also have the 50-Day EMA breaking down below the 200-Day EMA, which of course is a very negative longer-term indicator. Whether or not I would follow that remains to be seen, but I know a lot of systematic traders will.

On the upside, if we were to break above the ¥132 level, or perhaps more specifically the candle from last Wednesday after the Bank of Japan decided to reiterate its desire for yield curve control, then I think the US dollar starts to take off against the yen. In other words, I believe we are at a major crossroads at this point, therefore think we’ve got a situation where the market is about to make a huge decision rather soon, and therefore you need to be cognizant of any impulsive move that happens as a potential bigger trading opportunity going forward.