• The EUR/JPY pair is one I am watching very closely.
  • This is mainly due to the fact that the market is approaching a psychologically significant figure in the form of ¥155, and that we have seen quite a bit of noise in that area previously.
  • The question now will be whether or not the market can form some type of “double bottom”, and of course whether or not the so-called “death cross” comes into the picture and forces people to acknowledge that we might go much lower.

EUR/JPY Forecast Today - 12/09: Euro Weakens vs Yen (Chart)

Risk Appetite

The carry trade has been absolutely slaughtered over the last several weeks, and quite frankly I’m a bit surprised at just how far out of control it’s gotten. We’ve seen the Japanese yen strengthen quite drastically, but it is worth noting that there is a Bank of Japan interest rate decision on September 20 that could greatly influence where we go next. After all, the Japanese can talk a tough game, but sooner or later higher interest rates will destroy the Japanese economy. Japan is one of the most indebted economies in the world, so this is like a massive game of chicken that they are playing, and somebody’s about to get ran over.

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Having said that, you need risk appetite to come back into the market for this to be a viable long position. The interest rate differential does favor the euro, but I would also point out that we are approaching an area that there could be a bit of a “trapdoor” waiting, meaning that if we break down from here, it could get really ugly, and really quick. The Japanese yen has gained about 12% against the euro from the peak, which of course is a huge move to say the least.

I think the one thing you can count on is a lot of volatility here, and at this point in time it’s a bit like” catching a falling knife.” While I don’t necessarily want to buy the market, I don’t necessarily want to short it either. However, I am willing to have a go with a small position to the upside if we can break above the ¥157.50 level.

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