Japanese yen continues on its way lower
The USD /JPY pair has been on a relentless rise and many traders are voicing opinions that this can not go on forever. We beg to differ as the pair in our views is heading towards 125.00 in the long term. But until we get there there will inevitably be some setbacks.
Starting from the macroeconomic analysis there is a lot to be said about the Bank of Japan's monetary policy action last week - the Japanese central bank decided to increase the pace of money printing and on top of that it promised to start buying riskier assets such as stocks and mortgages.
All of this led to a huge spike in volatility which resulted in the USD/JPY breaking to the upside and leaving everything in its path in shambles as the market relentlessly started selling Japanese yen and buying us dollars. The US dollar has benefited to day from a new form of risk sentiment which involved the midterm elections.
The Republican party has won a Senate majority and is now in full control of both houses of the US parliament. There is not telling how this might actually affect the economy in the long run, but generally republicans are perceived by the markets as more sound fiscal policy.
Looking at the charts, we are seeing few opportunities to explain what comes next. Its pretty much been a steady rise in a straight line up. What is missing form the picture is a new batch of data from the US, which we will get eventually on Friday.
However our view is that we can make a trade tomorrow if the price drops towards 114.20. We would be buying daily calls there for the experts at 20:00 GMT, aiming to secure a rebound just before the session closes. On the flip side only a break below 114.00 would open the door for the price to go lower by the close tomorrow.