The EUR/JPY is near vital support which was last tested in mid-July before a large bull run engaged and peaked in early September. The Japanese yen, however, is now acting in accordance with its historic role as a solid barometer of global risk appetite. Its downward momentum currently is an indication that financial institutions are bracing themselves for the unknown.
No speculator should discount the near term impact that will take place in forex and equity indices over the next three days. The US elections are set to begin tomorrow and the world will be watching and anticipating the result. In many quarters a Joe Biden victory is expected, but because of the surprise result four years ago making assumptions before the official result is concluded would be a foolish endeavor. Because of this, many investment houses have turned cautious and are taking a wait-and-see approach.
The conservative mannerisms of investors will open the door for speculators to ride on their coattails the next couple of days, but trading will still be dangerous even within a forex pair like the EUR/JPY which tends to produce nice trends. While the current price of the EUR/JPY challenges important support, traders should still expect choppy conditions and even surges of volatility if larger institutions park money in seemingly bizarre and haphazard ways.
If support near the 121.850 juncture is broken lower, traders will focus on a potential downward run towards the 121.500 to 121.230 marks. Speculators should be fully alert when trading the next few days, and have limit orders working and they should be monitoring their forex platforms carefully as trading volumes surge and become complicated with quick changes in direction which are certain to happen.
Speculators can take advantage of both sides of the trading momentum which are certain to be displayed the next few days with sudden reversals evident. They also need to fully understand that conditions may be extremely fast as emotions affect market psychology. The EUR/JPY may produce further bearish conditions particularly if financial houses turn from being cautious to expressing outright concern about the outcome of the US elections and the impact it will have on financial markets in the coming month.
EUR/JPY Short Term Outlook:
Current Resistance: 122.040
Current Support: 121.870
High Target: 122.500
Low Target: 121.230
