The EUR/JPY bullish trend has remained strong long term and in early September the forex pair tested the 127.000 briefly before reversing lower. Speculators who believe the reversals which have emerged the past four trading sessions will be short-lived and cannot be faulted. However, two short term storms must be considered by active traders today and tomorrow.
A large typhoon has made its way towards Japan and although the worst of the storm appears to be missing the nation its effects will still be felt. Trading based on fear of weather catastrophe can be a very dangerous endeavor, but it is good to keep in mind the perspective of financial institutions that are situated in Japan and the desire to seek safe-haven investments when there are concerns on the horizon. Meaning safe-haven investors in Japan tend to accumulate the JPY under such circumstances.
While Typhoon Haishen tumbles through Japan a bigger storm to consider may be the equity markets of the nation. The Nikkei Index is a major stock exchange within global finance and traders in Japan have mirrored their international counterparts with nervous and negative price action the past few days. As the Americans sit on the sidelines today because of Labor Day traders will certainly contemplate their risk appetite going into tomorrow’s trading sessions.
However, price action and negative sentiment may have already been largely filtered out of investor psychology. Traders need to keep in mind that ‘smart money’ via large institutions frequently is moving ahead of the retail market and does not care how short term technical indications are being interpreted by people outside of their scope. Financial institutions tend to play a long game. This sets the table nicely for speculators of the EUR/JPY in the coming days. Since touching high water marks the first day of September, the forex pair has incrementally traded lower and tested support levels which have its traversing levels which may produce reversals higher again.
After touching the 125.3000 support level on Friday before going into the weekend, the EUR/JPY has seen some buying emerge and its bull trend shows signs that it is still functioning. Speculators may be tempted to buy the EUR/JPY with a limit order near the 125.650 level and seek upward movement and target resistance near the 125.800 level with the potential to see even higher ground attained.
EUR/JPY Short Term Outlook:
Current Resistance: 125.850
Current Support: 125.500
High Target: 126.400
Low Target: 125.280
