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Has EUR/JPY Found Support?
EUR/JPY has been a strange beast lately. In the olden days the pair used to trade on pure risk flows rising when equities rallied and falling when they declined. Lately however the euro has been trading in the exact opposite direction as carry trade flows have turned into risk aversion currency and as a result EUR/JPY has been in a tug of war between a rising euro and a falling USD/JPY.
Of course tomorrow’s NFP report will be the key driver of trade for the pair, but there is good reason to think that payroll data meets or beats expectations EUR/JPY could rise. Stocks could weaken on fears that the Fed will be likely to jumpstart the tightening cycle but USD/JPY will likely ignore any equity selloff and will follow the bond markets which will take rates higher. Meanwhile euro will likely hold ground and may even rise if risk aversion flows accelerate and that in turn should keep EUR/JPY.
With the pair looking to have made a higher double bottom the technical pattern is set up for a bounce as well.