The EUR/JPY pair had a positive showing on Thursday, challenging the 125 handle as resistance. As you can see by the daily chart, the 125 handle did in fact told as resistance, but it seems more like a market that is simply bouncing around the handle, rather than failing at it.
In order to start buying this pair again, I would like to see the Monday and Tuesday candles taken out to the upside. This would entail breaking the 126 level, which to me would be a bullish continuation of the momentum that got us to this point in the first place. At this point time, I have aptly no problem with the price action and do not think that it is negative in the least. After all, it was just two weeks ago that we were 500 pips lower.
With the Japanese parliament voting on potential deputy ministers for the Bank of Japan today, and is likely that we may finally get that boost to continue Yen weakness. After all, once these two are confirmed, the Bank of Japan can get the business and start killing the currency. Assuming all things being equal, it does look like the Diet is set to confirm these two, and allow the central bank to get aggressively easy.
Quantitative easing, long-term trend
The Bank of Japan is about to embark on some of the most aggressive quantitative easing we have ever seen. With that being the case, it's hard to imagine a scenario where the Yen doesn't lose value against other currencies. Even with the mass in Europe, the monetary policy out of the European Central Bank has a long way to go before it even becomes close to matching Japan's monetary policy. With that being the case, we should see continued bullishness in this market.
However, one of the things that you will have to watch out for today is the Italian parliamentary coalition attempt. If the Italian parliament somehow upsets the market, we could see a bit of a pullback. However, I believe that the market participants have basically priced then the failure that's about to come out of Rome, and as a result it shouldn't cause that big of a problem. Regardless, if we get above the 126 handle I believe the market will have already made up its mind.