Potential signal
I am buying here, with a stop just below the 185 level, and a target of 188 above.
The Euro has finally broken above the 185 Yen level during the trading session on Thursday, an area that had been pretty obvious resistance, and smashing through there, of course, is a good sign.
What I'm looking at here is the carry trade essentially. The carry trade has been in vogue for a while. It did get trashed recently when the Bank of Japan came in and propped up the Yen with the help of the Americans, and they actually sold Euros to do it, so this was Ground Zero.
EUR/JPY Breaks 185 Resistance as Carry Trade Conviction Returns
The EUR/JPY pair bouncing the way it has during the session shows a continuation with real conviction off of the 50-day EMA. The interest rate situation, of course, favors Europe; it has for some time against the Japanese Yen, and the Bank of Japan finds itself in a situation where raising rates is pretty unpalatable because of the debt situation in that country.
The biggest concern will of course be central bank intervention again, but quite frankly, that typically only slows down a move, not necessarily turn it around. You can see that we had been grinding higher for some time until basically New Year's Day here this year, and since then we've been somewhat sideways.
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I think the real concern is the dollar against the Yen, because most transactions internationally involve the dollar, so this isn't as big of a concern. But it will have moves in sympathy with any intervention against the US dollar via the Japanese Yen.
Nonetheless, this is a market that looks like it's ready to continue its ascent, and it has in fact ignored the Bank of Japan for a while. Doesn't mean that the Japanese can't get involved, but that's what stop losses are for to begin with.
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