USD/JPY Forecast October 26, 2016, Technical Analysis

The USD/JPY pair initially tried to rally during the course of the session on Tuesday, but found the 105 level above to be far too resistive to continue going higher. Because of this, we pulled back to form a bit of a shooting star but at this point in time I think this just shows that the market has made its first serious attempt to break out to the upside. Once we break above the 105 level, I am a buyer. I also believe that the 103 level below is essentially the “floor” in this market, so at this point in time I have no interest in selling this market. This will be especially true as the Federal Reserve looks to raise interest rates in December possibly, while the Bank of Japan is light years away from doing the same. With this being the case, it’s very likely that the US dollar will continue to get a bit of a boost by traders.
On top of all of that, I believe that the Bank of Japan has set a “line in the sand” near the 100 level, so any time we get closer to that particular region, the buyers will come back in as the Bank of Japan will either expand quantitative easing, jawbone the markets higher, or perhaps even intervene directly. With this being the case, the market is essentially a “one-way trade”, but I do recognize that we will have pullbacks from time to time as we try to build up enough momentum to finally break out.
Once we do break out, I believe that we will reach towards the 107 level, and then eventually higher than that. Eventually, I believe this becomes a longer-term “buy-and-hold” type of situation, and I believe that many careers will be made buying taking the longer-term outlook when it comes to this particular pair. However, that doesn’t mean that is going to be easy so for you longer-term traders, IA would encourage you to try to add small positions going forward, and gradually building to a sizable one.