Potential signal:
- I am buying right now.
- Stop loss 181 target 184.8 above
EUR/JPY pushes above ¥182 as momentum builds after weeks of consolidation. Support near ¥180 and a favorable, stable rate differential underpin the move, while persistent yen weakness continues to drive the pair broadly higher.
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The euro rallied a bit against the Japanese yen during the trading session on Tuesday as we are now breaking down to jump above the 182 yen level. The market has been consolidating for the last couple of weeks, and now it looks like it has finally found enough momentum to get going to the upside. To the downside, we have the 180 yen level offering support, and all things being equal, I think we have to look at this as a market that's got further to go. And with this, I think you need to believe that market participants are going to continue to think of the interest rate differential as being favorable. Furthermore, the European Central Bank is very unlikely to cut rates. So, it is a stable interest rate differential that people can collect at the end of every day. And that in and of itself makes the pair somewhat attractive.
Yen Weakness as the Dominant Driver
That being said, I think this is probably more about the Japanese yen than the euro, as the Japanese yen is struggling against most currencies, not just the euro. And I think you have a scenario where traders will continue to look at the Japanese yen as a currency that's backed by a central bank that just simply cannot tighten monetary policy. And with the election a few months ago, it looks like the doves will be taking over in Japan as well.
Bond markets in Japan have been a little bit noisy, and we've seen interest rates rise. But at the end of the day, that will be squashed before it's all said and done, and things have calmed down. So that ties in quite nicely with the Japanese yen losing value, as we have seen here against the euro and across the forex world against multiple other currencies.
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