Upward Trajectory Displaying Abundance of Potential

New long-term highs were made in the USD/JPY currency pair yesterday, as financial institutions absorbed another round of information from the U.S Federal Reserve.

Yesterday’s trading in the USD/JPY saw the Forex pair reach ultra long-term highs near the 137.800 vicinity. Intriguingly the upwards trajectory displayed yesterday was not extremely violent, unless ‘a trader’ happened to be on the wrong side of the price action. The USD/JPY continues to demonstrate a strong bullish trend which until proven otherwise could prove unfortunate to be wagering against. The trend upwards has been incremental.

Long Term Bullish Trend of USD/JPY is Likely Not About to Erode Quickly

Certainly, at some point in the future the USD/JPY will likely start witnessing an erosion of value.  However, the current economic environment is causing a dynamic swirl of confrontation regarding central bank policies between Japan and the U.S, this while inflation is being confronted internationally. The Bank of Japan continues to remain dovish and the U.S Federal Reserve is voicing hawkish rhetoric.

• U.S Federal Reserve Meeting Minutes point to another rate hike the last week of July.
• Bank of Japan continues to voice a dovish interest rate policy and is likely to remain stubborn.

Technical traders do have the ability to also monitor the USD/JPY via extremely long-term charts, and see historically the USD/JPY has traded at higher vantage points. This is not the first time the currency pair has seen such levels; today’s prices are still below the highs of 1998. Technical traders may want to note the USD/JPY touched a mark of nearly 147.750 in August of 1998. That is not to say the USD/JPY will find this value again, it is merely to note the potential exists for greater heights and should not surprise speculators.

Additional Buying Could be Ignited if the 138.000 level is Toppled

Psychological price levels will have a strong influence within the current pace of price velocity of the USD/JPY currency pair.  If the USD/JPY begins to show an ability to move above the 137.500 level and sustain this value, speculators will no doubt start to eye yesterday’s highs and may believe the 138.000 mark is going to be challenged sooner rather than later. If the 138.000 level is flirted with and surpassed this could open the door for an additional wave of buying.

Speculators who prefer to be conservative cannot be blamed, but perhaps they should not be contrarian.  Selling the USD/JPY and looking for reversals lower could prove to be very dangerous still. Yes, the USD/JPY could turn lower rapidly, but it is unlikely that a massive selloff will erupt in the coming days. It is more likely that moves downwards will spark a rebound and potentially higher prices. The lack of a unified central bank interest rate policy among the major nations – U.S and Japan included, will likely remain a focal point for a stronger USD near term.

USD/JPY Short-Term Outlook

Current Resistance: 137.530

Current Support: 136.980

High Target: 138.210

Low Target: 136.640

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