The USD/JPY initially rose during the Wednesday session, but by the end of the session the pair had fallen back down to form a shooting star. The bearish candle could signal a retrace coming, but the fact is that just two sessions ago the market formed a hammer, so this may be more of a sign of consolidation to come.
If this is indeed true, this would be a massively bullish sign as the markets have risen so far that a pullback would have been almost a given. When a trend changes like this one has, and we are only seeing consolidation like we did just above the 80 handle, that is extremely bullish. Perhaps we are seeing the same thing now that we are above the 83 handle.
The Bank of Japan continues to buy JGBs, and this is essentially the same thing as printing Yen. The flooding of the market with Yen can only bring the value of the Japanese currency over the long run. The pair could run into a bump here, but the 85 level seems almost a given at this point.
The shooting star does suggest that the 84 level is going to be tough to crack, but it is hard to imagine anyone out there that doesn't see that the pair is certainly changing its overall feel. This should make the seller nervous, and as a result we may see a breaking of the 85 level much easier than we would have thought. The Dollar will more than likely be the safety trade that traders prefer in general, so this will put a bit of a bid in this pair going forward anyway.
The breaking of the top of the Wednesday session highs would be a massively bullish sign at this point, and as such we would be adding to our long position if that happens. As for pullbacks, if we get one we will treat it as a buying opportunity on the first sign of support on the daily close, preferably at a large round number.
USD/JPY Forecast March 22, 2012, Technical Analysis
USD/JPY Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3