EUR/JPY Channel Could Come Back Into Play
Ross Woodfield | Sep 02, 2014 03:07AM ET
There has been a big impulsive movement for the Yen today as a result of some political news, and this could provide traders with an opportunity to short the Euro ahead of the ECB meeting later this week.
Prime Minister Shinzo Abe announced a shuffle to his cabinet today, which will see him appoint Yasuhisa Shiozaki as the Labour and Welfare Minister. He is known as a supporter of overhauling Japan’s pension investment fund and this news pleased traders of the Nikkei, sending it to a 4 week high. As is the relationship between the Yen and the Nikkei, when one rises the other falls, thus the Yen has weakened against the Euro and is now close to the bearish trend in the EURJPY pair.
The trend has been tested on several occasions and has so far held solid. If the trend is tested again, it’s likely we will see a bounce off it and a movement towards the lower level of the channel. The meeting of the ECB on Thursday is going to be a pivotal one. There is growing speculation that Mario Draghi will talk about implementing another round of stimulus, and that will certainly lead the EURJPY pair towards the bottom of the channel.
It would be wise to set a stop loss outside the channel as there is plenty of news between now and Thursday, with plenty of PMI results out of the EU and a Bank of Japan press conference early on Thursday. When looking for targets it pays to not previous levels of support. These can be found at 136.893, 136.651 and 136.401.
The Yen has taken a hammering against the Euro, however, this could provide an opportunity for traders looking for the EURJPY pair to bounce off the trend line.
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