Potential signal:
- If the market could break above the 165 yen level, then it becomes a long-term signal.
- The stop would be 163, but the target could be as high as 171.
The Euro has been all over the place against the Japanese Yen, which is not a huge surprise considering that the Bank of Japan interest rate decision was early in the day. They did suggest that they weren't really sure how things would play out, mainly due to the fact that tariffs could cause chaos through financial markets.
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So, with that being said, the Bank of Japan did nothing, but they are still expected to raise rates sometime later this year. Because of this, we find a very interesting setup considering that the candlestick from the previous session was a shooting star, and now we have somewhat of a hammer, although the day isn't quite over.
As we approach a significant resistance barrier, in the form of a range of selling pressure from the 164 yen level to the 165 yen level. It'll be interesting to see how this plays out because most of the Japanese yen currency pairs look the same at the moment. So, this is decidedly something about Japan and maybe not so much about Europe.
Euro Follows the EU Economy
That being said, the Euro has been very strong as the European Union exits recession or at least the bigger economies are. And therefore, it does have a bit of a knock on effect in this pair anyways. That's why I'm featuring it here. The question now is whether or not the yen continues to strengthen based on a risk off model. I think there's a very high probability of this, but if we did break above the 165 yen level, it could change everything.
While I'm not necessarily looking for some type of massive meltdown here, I do think that the euro may struggle a little bit against the yen as we climb from here. It'll be interesting to see how this plays out, but if we get a lot of shocks to the system, and let's face it, there's a lot out there that could, the yen should strengthen.
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