EUR/JPY Forecast October 21, 2014, Technical Analysis

The EUR/JPY pair fell during the course of the day on Monday, but bounced enough to form a nice-looking hammer. Ultimately, we feel that this market continues to go higher and heads towards the 138 level. That is a level that has been massively resistive in the past, and as a result we feel that the market will be attracted to it. That being the case, if we can get above the 138 level, we feel that the market should then head to the 140 level. On the other hand, if we fall from here we believe that pullbacks will be nice buying opportunities as there is plenty of support just below as well.

Time and time again we have seen the 135 level act as support, so therefore we do feel fairly confident on pullbacks the buyers will come into play and push the market higher again. On top of that, it keep in mind that the Japanese yen has been sold off rather significantly lately, and although the Euro is a bit of a mess at the moment, the fact is that the Japanese yen is one of the few currencies out there that is weaker than the Euro, at least in the short-term.

We feel that the Bank of Japan will continue to push this market higher because of its quantitative easing and the Japanese Government Bonds market, which of course drive down the value the Yen. The pair should continue to find plenty of buyers, and it should be noted that the weekly chart formed a perfect hammer at the perfect level, in the form of the 135 handle. We have no interest in shorting because of this, because we recognize that the market should find plenty of longer-term buyers willing to step in at this area.

On top of all that, all of the JPY related pairs look the same at the moment, meaning that we believe the market will continue to sell off the Yen in general and this should translate to a positive market here as well.