EUR/JPY had a rally during the Tuesday session, as the Euro continues to enjoy a little bit of what I would consider to be simply a "relief rally." After all, the Euro has been sold off ruthlessly over the last several months, and in order for the bearish momentum to continue we simply have to have some type of "reload" in order for sellers to continue to control the market.
However, I certainly will not buy the Euro anytime soon. If you think about what's happened over the last several sessions, there really is no reason to think that the crisis in the European Union is suddenly resolved. It doesn't matter that the stock market has chosen to ignore it, as it has done several times before. What matters is the overall trend of risk assets in general.
You have to keep in mind that the stock markets are moving on expectations of central bank easing. This pair typically follows the stock markets, but hasn't done so recently. This is a bit of a disconnection to the norm, and I believe this currency pair reflects what's going on in global markets much more than your typical equity markets.
Massive confluence
The pair sees itself in a bit of a crossroads. As you can see by the chart, I have drawn a longer-term trend line that goes back to the beginning of April. We did bump up against that on Tuesday, only to fall back down. The moving average on the chart is the 50 day exponential moving average, and it is one that is followed by quite a few traders. Finally, there is the Fibonacci retracement tool that I have drawn from the fall in this market back in late June. During the Tuesday session, we fell right at the 50% which coincided nicely with the other two technical indicators.
With this being said, it makes much more sense this market would fall then rise. It is because of this that I am very bearish of this market, and willing to sell with a reasonably tight stop as this should leave a nice risk to reward ratio. As for buying, I have absolutely no interest.