EUR/JPY forecast for the week of October 27, 2014, Technical Analysis

The EUR/JPY pair fell during the course of the week, but found enough support near the 135 level to turn things back around and form a nice-looking hammer. This hammer of course suggests that the market is going to go higher, and as a result a break of the top of the hammer tells us that the market will more than likely test the 138 level, and then possibly the 140 level.

All things being equal, we do not like the Euro. However, this is in relation to the Japanese yen, a currency that is certainly been worked against heavily by not only the Bank of Japan, but the Forex markets on the whole. The USD/JPY pair certainly looks very bullish of this moment in time, and as a result we should continue to see the Japanese yen selloff. By extension, this market should continue to go higher.

We recognize that the 138 level should be resistive, but ultimately we have been above that level before, so we don’t believe that it’s going to be impossible to break above into the future. The market could go as high as 145 given enough time, but we recognize that it will be a bit of a fight going higher in the meantime. We don’t think that is going to be easy to go higher, but ultimately this market has such a massive base at the 135 level that is a most impossible to imagine selling this market.

Looking at this chart, if we get below the hammer that form from the previous week, that would be very negative but at the level we would think that it would be very hard to break down, simply because the 135 level has been so supportive over the longer term, and as a result we feel that this market will continue to offer buying opportunities every time he dips close to that level. Ultimately, we do think that the market breaks out and heads to the 145 level, but we recognize that it’s going to take some time.