EUR/JPY – Gunning for a Break of 140

EUR/JPY – Gunning for a Break of 140

EUR/JPY – Gunning for a Break of 140

Fundamentals

From a fundamental and technical basis, it should only be a matter of time before EUR/JPY breaks above 140. Considering that the currency pair ended Friday’s session only 10 pips or so away from this level it won’t take a stretch of the imagination to believe that at bare minimum a test and most likely a break of this level will occur. However it is not just the proximity of this level that has us convinced that the currency pair will not only breach 140 but make a run for 141. First and foremost, EUR/JPY is traditionally the quintessential risk on trade, which means that when stocks do well, EUR/JPY should rally. However even though U.S. stocks have climbed to record highs, we have seen a very limited up move in EUR/JPY and a lot of that had to do with ECB uncertainty. Now that euro has survived negative rates, EUR/JPY should be able to trade higher. At the same time, Friday’s non-farm payrolls report supported the recent gains in USD/JPY.

Technicals

Taking a look at the daily chart of EUR/JPY, the currency pair has been in turn mode since the end of last month and with the latest rally, it has now entered the Buy Zone according to our Double Bollinger Bands. A break of 140 would take the currency pair well above the 38.2% Fibonacci retracement of the December to February decline and psychologically significant resistance level. If that occurs, there’s no major resistance until 141. However if EUR/JPY fails at current levels, a drop back down to its 3 month low of 138 becomes likely.

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