USD/JPY

The USD/JPY pair rallied on Thursday, breaking above the 115 handle. That of course is a very significant psychological handle, and an area where we had recently seen both support and resistance. Because of this, I believe that the market is ready to continue going higher, and once it does we should reach towards the 118.50 level, perhaps even higher than that. Because of this, I believe that short-term pullbacks offer value that we can take advantage of, as the Japanese yen has been sold off so viciously, and it looks as if the market should continue to accept that the Bank of Japan should continue to be extraordinarily loose with monetary policy the US dollar should continue to benefit from strengthening interest rate policy coming out of the Federal Reserve.

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AUD/USD

The Australian dollar rallied during the session on Thursday, as the 0.75 level continues to be massively supportive, and thus I believe that the buyers could return to the market. A break above the top of the range during the session on Thursday should send this market towards the 0.77 handle. The market breaking down below the 0.7450 level census market much lower, and of course the gold markets have a massive influence on where the Aussie goes. Keep in mind that the inaugural speech today could cause a bit of volatility in the US dollar, and thus it’s likely that the US dollar will be difficult to trade during the day. I believe that the breakout of course means something, but we need gold to support the move higher simultaneously with the Australian dollar rallying.

The market is a bit overextended, and that’s part of what I have a problem with. I believe that the overextension will eventually lead to a significant pull back. With this, you’re going to have to be very careful with the Aussie.

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