- During the trading session on Wednesday, we have seen the euro try to rally against the Japanese yen only to turn around and show signs of weakness again.
- By doing so it looks as if the market is trying to sort out where we are going.
- But you can see that we just don't have enough momentum to continue to go to the upside.
The 155 yen level underneath is a large round psychologically significant figure, and it is an area that has been very important for some time. The key question now is whether this support level will hold. Traders are likely viewing this area as a potential buying opportunity for value hunters, making a bounce possible.
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However, if the price breaks below the 155 yen level, a significant decline could follow, as this area has historically provided strong support.On a move above the 158 Yen level, then I think the market goes looking at the 160 Yen level, which is where the 50 day EMA currently resides. And of course, it's also an area where we have seen some significant action in the past.
On a Move Higher
Anything above that level then becomes really bullish. And I think you would probably see the Japanese yen struggling at that point due to the fact that the Bank of Japan, although more hawkish than they once were, the reality is that most central banks around the world still offer quite a bit more in the way of interest rates. Remember, you get paid to hang on to this EUR/JPY pair at the end of every day, although it's not necessarily the greatest swap, but it is something and that is something that you need to pay attention to over the longer term.
In general, I think we are at a major point of inflection and that needs to be paid attention to as well. And therefore, I will be watching, but I also recognize that you do not want to jump the gun here. You want to have the market tell you which direction it's going in before putting money into work.
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