The EUR/JPY pair fell during the balance of the session on Wednesday, but as you can see got enough of a bounce near the 131.50 level in order to form a nice looking hammer. This is the top of a larger consolidation area, so I think it's a natural place to see a bounce that could significantly affect the market. A break of the top of the hammer should send this market back towards the 135 level, which is my target to begin with. I recognize the fact that the 134 level is resistance, and as a result we could expect some noise in the general vicinity. However, I do believe that we will eventually get to that aforementioned 135 handle.
Going forward, I also believe that we will break through that level and continue higher. After all, the Bank of Japan continues to work against the value of the Yen, and because of that this pair should go higher and higher over time. The Euro is relatively strong against the Dollar, and that always have a positive effect on this market as well.
Europe just exited recession.
The Europeans just exited a recession, so that naturally brings a bit of demand for the Euro in general. That being the case, I fully expect this market to continue higher, and it should continue higher for some time. After all, the Bank of Japan is just now starting its easing process, and as a result we should see the Yen continue to depreciate over time. I firmly believe that we are starting to see the beginning of a longer-term uptrend in this market.
Any time this market falls from here on out, I suspected buyers will come in and pick up the dips. I also think that the 130 level is without a doubt significant support and quite possibly a "floor" in this market. If we break down below there, we could have serious trouble in this marketplace, but I really don't see that happening as it is so far below and the candle from the Wednesday session has been so supportive looking.
