The USD/JPY pair rose during the course of the day on Wednesday, bouncing off of the 102.20 region. The 102 level below is supportive in the sense that it is considered to be “fair value” in this marketplace, being halfway between the support at 101, and the resistance at 103 for this massive consolidation area. I don’t see this market breaking out of these two levels, simply because we are in the dead of summer. However, one does have to notice that the last attempt to break down did not reach all the way down to the 101 level. That’s normally a sign that the market is ready to break out though, so I have to keep my eyes on the 103 level.

It will come down to interest-rate differential as per usual in this marketplace, and the US Treasury markets need to be watched in order to get a feel on where this pair is probably going to go. Interest-rate differential in the 10 year notes seem to be especially influential on this market, so if they continue to expand in favor of the United States, this pair will eventually break out.

In the meantime, playing a range bound market so clearly defined can be profitable.

I really like trading range bound markets in quiet scenarios like this, simply because it allows me to take my time with my trades, as the support and resistance becomes so obvious. This market has been stuck in a 200 pips range for most of the last year, and as a result I feel very confident in these areas mattering. However, I do believe that ultimately we break above the 103 level, and that this time the market should head to 104 next, and then ultimately the 105 level.

If we do fall from here, I suspect that the 101 level will continue to hold true, simply because the longer-term charts to look very supportive all the way down to the 100 level below there. With that, this is a “buy only” type of market, but it will be on the dips and in an over and over fashion.

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