By: DailyForex.com

The USD/JPY pair gapped higher at the open on Monday, as the US dollar continues to be one of the more favored currencies out there. That being the case though, the market then spent the rest of the day falling backwards to find support. Ultimately, it did find it at the 104 handle. We filled the gap, and then bounce slightly as the hammer suggests that we are going higher. I believe that if we can break the top of the candle, we should head to the 105 level given enough time. It’s there that we will find significant resistance and longer-term forces come into play.

I think that the 104 level is significant, but breaking above that isn’t going to be anywhere near as momentous as breaking above 105 will be. Above that level, I then start to target the 110 level, over the longer term of course as it is a fairly significant move.

We should see this trend continue.

As the Federal Reserve looks to cut back on quantitative easing going forward, it makes sense that the interest-rate differential will continue to favor the US dollar over the Japanese yen as there is more “meat on the bone” as it comes to the bond market. Ultimately, I believe that every time this market pulls back there will be buyers and as a result I will look to the shorter-term charts in order to go long. I don’t think that there is a scenario in which and willing to sell this market, and I now believe that the 103 level is in fact the “floor.”

With that being the case, I think that the market will continue to go higher and ultimately give several opportunities again and again. Once we get above the 105 level, I am going to start building up a larger position, adding to it every time we pullback and find support on the short time frames. With that, I anticipate having a very large position by the end of the year, and then closing out somewhere closer to the 110 level.

USDJPY 82614

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