The Euro has peaked above the swing high during the trading session here on Tuesday as the Japanese yen continues to struggle overall.
The Euro has peaked above the swing high during the trading session here on Tuesday against the Japanese Yen, and it does look to me like a market that is probably going to continue to find plenty of buyers. This is not necessarily a situation where I love the Euro; I just think the Japanese Yen is going to continue to be that weak.
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We have been in a nice uptrend in all of the yen-denominated pairs for some time now, and one thing that you could look at on this chart, at least in the sense of whether or not you should trade this pair, is that at least you avoid the US dollar. There are a lot of questions about the US dollar at the moment.
Bank of Japan Policy and the Carry Trade
That being said, the one thing that’s not a question is that the Japanese Yen continues to weaken, and I think there are a lot of problems in Japan that will continue to show themselves in the currency markets. Traders continue to look at the Bank of Japan and recognize that they can’t tighten policy too much.
And while the European Central Bank isn't necessarily going to make big moves going forward, as we are essentially where we need to be there, the reality is that the Bank of Japan is going to have a problem where it cannot raise rates enough to avoid the carry trade.
I think this is a big situation where looking at the Japanese Yen as a funding currency and continuing the overall carry trade is going to appear in this pair as well as many others. I believe that as long as we can stay above the 50-day EMA, this is a strong market that could continue much higher, possibly even as high as 188 Yen.
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