The USD/JPY pair continued to shoot straight up during the Friday session as the Yen is starting to become parabolic in this move. The Bank of Japan has announced an escalation of bond buying, and as a result the pair continues to gain momentum and the Yen in general is being sold off.
However, the 80 level just above is an area that will give the bulls a fight as it is one of the most impressive resistance levels on any chart in the Forex world currently. Because of this, and the fact that the pair is so parabolic, it is hard to see that the upward momentum will continue straight through the level unabated. The level simply will produce some kind of reaction.
The area is where we are looking for our next signal and we are willing to sell right away on signs of weakness as we approach the 80 level. The level has proven to be very important in the past, and there is no reason to think that it will have changed so much recently, even with the momentum. Either way, this parabolic move will have to slow down. This area seems to be a great spot for it.
The pair is particularly risk sensitive and negative headlines from the European Union will more than likely play havoc in this pair if something goes wrong. The Yen will still be a bit of a safe haven, and as a result it will be bought up if things go wrong with Greece, or other such issues.
The breaking of the 80 level would have the market enter a new phase as we would have seen one of the largest resistance areas broken. A daily close above that level would be needed in order for us to think the signal is real in that case. Buying at current levels is simply too close to the decision area, and as such we need to wait for confirmation.
If the area produces a particularly weak candle, we are willing to sell it as we see the 80 level as a binary event. One of two things will happen: Either the market continues up, up, up and away as we close above that level, or it continues to keep a lid on price.
USD/JPY Forecast February 20, 2012, Technical Analysis
USD/JPY Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3