The euro initially fell against the yen on Friday but has turned things around to show signs of stability. At this point, the markets are still looking bullish despite the intervention.
EUR/JPY
The euro initially dropped against the Japanese yen on Friday but found enough support just above the 182-yen level to turn things around. After intervention on Thursday, this is a sign that the market is willing to defend the 182-yen level, and I think it's also a sign that intervention isn't going to work long-term. That's not a huge surprise, it rarely does. And as a result, I think we're just hanging around looking for some reason to get moving to the upside.
For what it's worth, the US dollar also has stabilized against the yen sitting on support, so this is definitely a yen problem. Because of this, I think you have to look at this as a potential buying opportunity, recognizing that there is a certain amount of danger to this.
Japanese Yen Vulnerability and Interest Rate Differentials
But if we were to break out above the 188-yen level, that could send this pair flying. In fact, I expect to see that given enough time. The Japanese yen is in serious trouble, and the Bank of Japan really can't do much about it.
The interest rate differential will continue to be a major issue for the yen, but at the same time they have so much in the way of debt in that country that they simply cannot have higher rates to protect the currency. It has to be one or the other. And if that's going to be the case, then the Japanese yen will continue to be a currency that people are trading against, not for.
If we were to break down below the 182-yen level, then we may have to reset on the 200-day EMA a little closer to 180 yen, but as things stand right now, I don't see any real threat of that.
Potential signal: I am a buyer. Here. Stop below the 182 level, with a target of 187.50 above