USDJPY Testing A Reliable Buy-Side Level

All the stars continue to line up for the Yen to gain further ground against the US Dollar. However, unless you trade based on momentum, I can’t see how the current prices can make a good case to engage in short-side business after the days of sharp falls. The valuation of the pair is certainly suggesting we should be trading at least at 110.00, that’s hard to disagree on judging by the massive roll over in both the risk-weighted index (red) and the US-JP yield spread (blue).

The latest sell-off found, yet again, support at an area that has acted with strong bouncing effects in the prior three occasions. The pair is now encapsulated in a 112.25–65 box, with a resolution above or below needed to dictate the next directional bias. With the FOMC coming up next, the expected removal of liquidity may find it hard to break such sticky support. Any test of the downside, unless accompanied by a strong pressure in equities, may present short-term buy opportunities. Remember, the clock is ticking away before we see a major ‘reset’ of this chart, with vol to kick in style.