The EUR/JPY pair initially fell during the session on Monday, but found enough support near the 138.30 level to turn things back around and form a pretty impressive looking hammer. That being the case, looks like the buyers are stepping back in, and that they have gotten a little bit more aggressive than last time as this hammer could signal a “higher low.” That of course is the beginning signs of a trend change to the upside, which of course would be very interesting as the 138 level has been so supportive in the past.
The Bank of Japan is trying to devalue the Yen, so this would bode well for that move. While most people worry about the USD/JPY pair, it should be noted that the European market is every bit as big for the Japanese as the American market is, and the Bank of Japan certainly recognizes that. Because of that, they do in fact worry about the EUR/JPY pair overall.
Are we building a base?
One of the things about building a base is that it takes time. The fact that we had several green candles in a row suggests to me that the buyers are in fact stepping in. The fact that they aren’t necessarily impulsive isn’t a bad thing, in fact it shows that the market is truly trying to do work on the selling pressure. On top of that, the fact that we haven’t moved drastically one way or the other suggests that the market is in fact getting comfortable in this general vicinity, which of course is a good sign for the overall health of the uptrend that could be forming.
A break above the top of the hammer, I believe that this market will more than likely try to get to the 140 level, and above there to the 142.50 region. Pullbacks at this point time should continue to see support at the 138 level, and until we get a fresh new low I see absolutely no way to short this market going forward as support continues to impress.
