The EUR/JPY pair broke down during the session on Friday, testing the 131.50 level. However, we did bounce from there and ended up forming a rather attractive looking hammer. This hammer suggests that we could bounce from here, an area that we have seen quite a bit of support at recently. That of course makes quite a bit of sense but the reality is that the highs keep getting lower, and that suggests to me that any move higher from here is going to struggle.
That’s not to say that we can go higher, quite frankly it wouldn’t surprise me at all. I just think that it is going to be difficult to hang onto that move. Ultimately, I think that the 135 level will be massively resistive, so the move will die out by then in my opinion. Any type of resistive candle between here and there could be a nice selling opportunity as far as I see, and of course a break down below the bottom of the hammer that formed for Friday would also be a selling opportunity as it would be extraordinarily bearish. That particular move could send this market looking for the 130 handle before you know it.
Risk appetite
Keep in mind that this pair does tend to mirror risk appetite in general terms, and as it looks as if most of the stock markets out there are going to go higher from here, it is likely that we do go higher. That is part of what makes me feel somewhat comfortable with buying, but I also recognize that the volatility will make this much more difficult to hang onto than the typical trade. With that being the case, you may want to ask yourself whether or not you can do with the volatility before even getting involved. For myself, I don’t know that this is necessarily worth it but I do recognize that there is a buying opportunity that presented itself at this point in time.
