The Yen Continues its Implosion, Time to Buy?

USD/JPY (¥112.749)

• Resistance Levels: 114.20, 115.51, 116.35
• Support Levels: 112.10, 110.75, 116.35

The yen imploded and the U.S. dollar soared higher after the Bank of Japan (BOJ) announced they were expanding their quantitative easing program (QE). The moving higher has been occurring since a bullish reversal signal, above 105.44, occurred several weeks ago in mid-October. Please refer to the above MT 4 daily chart. Buyers appear to be targeting resistance levels above 114, with the next significant level at 114.20. A daily close above this level will challenge 115.51. Should the dollar lose ground we need a close back below 112.70 to indicate a short term top. If this happens sellers will challenge 110.75 then 116.35.

Let’s look at some trading strategy. Entering long positions looks enticing right now, but might not be the right move. Let’s look at the below 1 hour MT 4 chart. Here we see ebbing momentum with hesitation from both buyers and sellers. This indicates we could see some sideways trading today. Also, there is a valid risk aversion scenario. Traders are reacting to the end of the U.S. QE and Japan’s surprising expansion of their QE. This means we should not be shocked is we see short cover trades along with carry trades being ended. Standing aside for now might not be a bad idea. If you want to trade short term, look for choppy price action and adjust your trades accordingly.