EUR/JPY Forecast July 23, 2012, Technical Analysis

By FX Empire Analyst - Christopher Lewis
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The EUR/JPY pair fell hard during the session on Friday as the Spanish bonds continue to yield high levels. The state of Valencia has asked for a bailout, and as such it appears the situation in Spain is getting worse. The pain that a bailout of Spain would cause should make the Greek situation look like a walk in the park. By the way – that isn’t fixed yet either.

The pair looks as if it is ready to continue lower, as we have now hit a new low again. The hammer from late May has been violated, and this shows that the support is giving way at this point. The 95 level is just below, so it could cause a bit of a bounce as well, but it is obvious that the momentum is clearly on the side of the sellers at this point.

The 95 level could be targeted, or simply a bounce could be sold. In fact, the latter of the two plans is the one we favor, and suspect that any rally in this pair will be sold off in short order. We think the most obvious candidate for resistance at this point is the 97 level, and any pop to that area invites more sell orders in our opinion.

The pair looks like it is going to continue, but we need to make sure the USD/JPY pair doesn’t meltdown at the same time. After all, it is the USD/JPY pair that the Bank of Japan pays the most attention to, and because of this we need to see any declines as orderly. If the pair falls too quickly, the Bank of Japan will more than likely intervene, and this will make all XXX/JPY pairs rise in sympathy.

The buying of this pair isn’t even a thought at this point in time, and to be honest, we can’t even come up with a scenario that we would. If the Europeans suddenly come up with a real solution to their debt issues we might, otherwise we will simply continue to sell into any strength.

EUR/JPY Forecast July 23, 2012, Technical Analysis

EUR/JPY Forecast July 23, 2012, Technical Analysis

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