EUR/JPY Forecast December 17, 2012, Technical Analysis

The EUR/JPY pair initially fell during the session on Friday, but bounced in order to form a hammer just under the 110 handle. With the Japanese elections today, this could be a very pivotal moment in the Yen related pairs. If the opposition party takes over with enough seats (320) in the lower house, it gives them a way to bypass and therefore implement their policies on the Bank of Japan. They will be expanding their balance sheet, but now the question is by how much? With this in mind, we could see an extensive selloff of the Yen going forward.

Currently, we think that a move above 110 the sustained itself are more than a couple of hours would be a reason to start buying this pair again. Alternately though, we could see a pullback to the 108 handle before finding support. If we get that, we would like to see that support and start buying at that point time.