EUR/JPY Forecast December 3, 2012, Technical Analysis

The EUR/JPY pair rose during the session on Friday as we broke above the 107 barrier. However, by the end of the day we were barely above that on the close. This suggests that there is going to be a bit of a fight to be had in this general vicinity, but the easiest trade by far is going to be buying this pair.

The reason is going to be so easy to buy this pair is that we have formed a beautiful looking hammer on the weekly chart. Because of that, we know that the longer-term charts are showing buy signals, and as a result a breaking of the highs from Friday actually sets in motion not only a daily buying signal, but a weekly buying signal.

When you get both the daily and weekly traders involved, this really can accelerate a trend. This market has the added benefit of having the Bank of Japan works for it as well, as it appears that opposition leader Abe is looking to have the Bank of Japan print “unlimited Yen.” In fact, he is even stated as much. Compounding that is the suggested inflation target of 3%, and we should have a weakening Yen over the long term.

This is a risk sensitive currency pair however, and we do have plenty of things it can cause risk appetite to wane. Because of this, we have to keep an eye on what’s going on in Washington DC, as the fiscal talks continue to throw the markets around. In the end, once they get a deal in DC, is very likely that this pair will shoot straight up.

We currently have an estimated target at 110, and don’t really see any reason why it can’t be had we have no case in which to sell this pair, not at least until we see a sub-105 print at the end of the day. In fact, we are still bullish of this pair right now that any pullback that shows signs of support will also be bought as we figure stops can be said fairly tight and the risk to reward ratio is fairly strong.