EUR/JPY Forecast July 25, 2016, Technical Analysis

The EUR/JPY pair initially tried to rally on Friday, but then turn right back around form a bit of a shooting star. We look very likely to grind a bit lower, but I think that the 115 level should continue to be supportive, as it was such a resistive barrier previously. Also, you have to keep in mind that the European Union has quite a bit of negativity attached to it, and as a result it makes sense that people would rather own the Japanese yen. With this, the market should continue to sell off but I do recognize that there is a lot of support just below that 115 handle.
If we rally, we could go as high as the 120 level, especially if we can break above the top of the shooting star from the Friday session. That of course shows strength, but I don’t think that this would be an easy move to have. That move would more than likely cause quite a bit of volatility, so therefore you would have to be able to either hang onto that type of trade, or simply buy every time it dips and show signs of support because I do think that it would be very back and forth in its attitude.
I don’t think that we are able to break above the 120 level anytime soon, because it is such a major resistance barrier. That would in fact have the Euro showing real strength that it doesn’t have at the moment, as we have seen it fall against the US dollar and break down below the bottom of the consolidation area that it had been trading in recently. This shows that the Euro is losing strength overall, and truthfully I believe that the only reason we have bounced in this market is that the Bank of Japan looks very unlikely to stay quiet about the strengthening Japanese yen. While they may or may not intervene, the most certainly will do some type of quantitative easing if this keeps up. That of course will drive down the value of the Yen but we have bigger problems in Europe in my estimation.
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