The Euro dropped a bit in the early hours of Wednesday, only to turn around again against the Japanese yen.
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The Euro initially dropped a bit against the Japanese Yen, but we have seen a little bit of a bounce to show signs of life. The 186 yen level has offered a little bit of support, and ultimately I think this is a market that is trying to build up enough pressure to finally take off to the upside. After all, the Bank of Japan is a bit stuck at the moment as interest rates, even if they do rise, can only rise so much as the debt load in Japan continues to be a major problem.
Interest Rate Differential Keeps Buyers in Control
Ultimately, this is a market that I do think goes higher, and the 188 yen level would be an area that I think a lot of people would be aiming for. If we can break above that level, then it truly opens up a bigger move. Short-term pullbacks, I think, are continuing to be buying opportunities with not only the 185 yen level being support, but the 50-day EMA also offering the same.
Ultimately, this is a market that had been pretty consolidated over the last couple of weeks, and then I think ultimately the fact that we did peek above the top of the little rectangle that we had been in, now traders are going to pay close attention to risk appetite. Risk appetite is failing a bit, but the interest rate differential still favors the Euro, and as such it is a bit of a push-and-pull type of situation.
I have no interest in shorting this pair, mainly because I do not want to own the Japanese Yen in general. It's not necessarily an indictment of wanting to own the Euro. Most currencies seem to be failing to pull back against the Japanese Yen for any significant amount of time, and with that being the case, it's likely that we continue to see an upward trend not only here, but in other Yen-denominated currency pairs.