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The USD/JPY pair rose during the balance of the week, closing above the 105 level. This was an area that we’ve been targeting for some time now, and it appears that we are free to go much higher at this point. We would expect a little bit of a pullback after this move early in the week, but with the New Year’s Day celebrations right in the middle of the week, the liquidity could be low enough that markets may struggle for a little while. At the end of the week though, we fully expect to be higher than where we are now, especially considering that the two previous weekly candles had been supportive.
The 110 level was still be targeted ultimately, and we are long-term buyers and holders of this market as a result. We believe that this market will eventually climb even higher than that, as we are more than likely of the beginning of a long-term uptrend, perhaps one like we saw before the financial crisis that lasted several years. Entire careers were made by that uptrend, and we think that history may be getting ready to repeat itself. With that in mind, we are trying to keep a core position in this marketplace at all times.
The interest-rate differentials will continue to separate between these two currencies, as the Federal Reserve is looking to taper off of quantitative easing while the Bank of Japan is looking to expand its monetary policy. Because of that, the market should continue to go higher over the longer term, and we could eventually enter a bit of a “carry trading” situation again. For those of you who weren’t trading back then, it was simply a matter of selling the Japanese yen to make money. Interest-rate differential made sure that you made money by the end of the day, and we think that the marketplace may be entering that phase again. We are buyers on dips, and have no scenario in which we sell this pair at this moment.
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