The 203 Yen level of course is an area that is a large round psychologically significant figure, and the fact that we have turned around to show signs of life and then break above the top of it suggests that we are more likely than not going to go looking to the 205 yen level if we can get any type of momentum jumping back into the market. It's probably worth noting that the bottom of the hammer is sitting just above the 50 day EMA. So that of course is crucial.

The Importance of the 50-Day EMA

(Click on image to enlarge)

The 50 day EMA is an area that I think a lot of systematic traders will pay close attention to. If we were to break down below there, then the 200 yen level is a major area of interest as well. And obviously has a lot of psychology attached to it. If we turn around and break to the upside, then not only will we go looking to the 205 yen level, but possibly after that, even go looking towards the 208 yen level. Keep in mind that the market is highly sensitive to the interest rate differential between the British pound and the Japanese yen, and I think that will continue to be a major reason why this market goes higher. I don't have any interest in shorting this market. I certainly don't want to pay interest just to hold the Japanese yen as the Bank of Japan is essentially stuck with its loose monetary policy.

With all of this being said, I think you need to still look for buying opportunities but recognize that we have a lot of noise at the moment, so position sizing will be crucial at this point. The market is likely to see choppiness.

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