Potential signal:
- I am buying this pair now, with a stop at 179.40 below, and a target of 183.
- The euro continues to see buyers against the Japanese yen, as we are looking at this pair via the carry trade and the widening interest rate differential.
EUR/JPY
The euro initially fell against the Japanese yen, only to turn around and show signs of life as we jump back above the ¥180 level after initially plunging below it. The interest rate differential continues to favor the euro, of course. Recently, we have seen the Japanese yen suffer at the hands of the interest rate differential with most currencies.
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The fact that the Japanese only got 7 of 9 central bankers to vote for the latest interest rate hike suggests that it is probably only a matter of time before we see the market punish the Japanese because they can only raise so much in a certain amount of time.
The 182 yen level is an area that I think a lot of people will be watching.
Furthermore, you also have to keep in mind that the market is starting to turn things around. With this, the 50-day EMA is breaking down below the 200-day EMA, kicking off the so-called death cross. But that's typically a very late decision.
The ¥182 level is an area that I think a lot of people will be watching, and if we can break above there, it would be a very bullish turn of events. I think, in general, the market has sorted out whether or not the Japanese can tighten. I think the market is starting to understand that they cannot due to the massive amount of debt that the Japanese have incurred.
Without help from the Treasury, this could have gotten ugly. Right now, it looks like the ECB is going to continue to tighten rates. So, if that's the case, the differential should only continue to expand, making this more and more bullish.
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