The USDJPY pair took off during the session on Friday as the nonfarm payroll number came out much better than anticipated.

Because of this, it appears that the US economy continues to expand, and that of course drives the Federal Reserve closer to tightening monetary policy. On the other side the Pacific, you have the Bank of Japan and its ultra-loose monetary policy which is probably going to stay in place for the foreseeable future. Because of this, it makes sense that more money flows into the dollar than the yen, and now looks like testing the 120 level is all but assured.

That area could be resistive, but at the end of the day we feel that it will get broken to the upside eventually. With the strength of this candle, there seems to be quite a bit of underlying buying pressure in this marketplace as the Yen continues offer very little in the way of returns.

Don’t get us wrong, there is quite a bit in the way of resistance above but we feel that the market will eventually break above not only the 120 level, but the 121 level, and the 122 level beyond that. Because of that, it appears that the market is one that should eventually be one that you can buy and hold, but in the meantime shorter-term traders who are trading off of the daily and lower time frames charts are probably going to be better served of buying dips as they represent value in the US dollar. Expect a lot of volatility, but given enough time, we believe that the buyers will eventually win out. After all, this is an extraordinarily strong candle that has broken through a massive amount of consolidation in this region.

The 170 level looks like it could be a bit of a floor at this point, so really it’s hard to imagine this pair going below there. It could be a bit of a rocky road going forward, but we feel ultimately this is a very bullish pair now.

Editor’s Note: Equity investors/traders can use the Currency Shares Japanese Yen Trust (FXY, quote) ETF to take positions in the yen without a FOREX account.  The ETF looks to track the price of the Japanese Yen (USDJPY), minus ETF fee. The fund seeks to reflect the price of the Japanese yen (USDJPY) with the shares representing a cost-effective investment relative to investing in the FOREX market.

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