The EUR/JPY pair slid below the 130 handle during the day on Wednesday, but found enough buying pressure underneath to turn things around and form a hammer. The hammer of course is a very bullish sign but I think this is essentially going to turn out to be a bit of a “relief rally” as I stated in my EUR/USD analysis. At this point in time, the Euro is a bit oversold but I think the bearish pressure should continue based upon the fact that the European Central Bank has stated they would consider further stimulus if needed. The European Union is sluggish at best, and while the Japanese yen is a necessarily a currency I wish to own overall, the fact is that it’s not the Euro and that’s probably going to be enough at this point when it comes to this particular currency pair.
Selling Rallies
Just as I stated in my EUR/USD analysis, I think you can sell rallies at this point in time. I believe that the market will probably try to find resistance at the 131 handle, the 132 handle, and most certainly the 133 handle. In fact, I have no interest in buying this pair until we get well above the 133 handle, and even at that time I think we would struggle above.
I think that the market eventually will break down below the low that was printed on Wednesday, and that should set the market towards the 128 handle, followed by the 125 handle. I don’t think that the move lower it’s going to be easy, but it does seem to be what’s going to happen sooner or later. Rallies at this point in time should be used as entry points in order to take advantage of what is an obvious downtrend. In fact, I believe that this pair should continue to provide profits if you are patient enough to wait for rallies in order to punish the Euro again and again.
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