Euro Lower Against Yen in Safety Play

Alan Penny

8 October 2019

2 min read

Japanese Yen forex trading

  • Euro continues to struggle overall
  • Almost completely wipes out bullish candle from previous session
  • Moving averages continue to point lower
  • Japanese yen gets bid across forex world

The euro initially tried to rally against the Japanese yen during the trading session on Tuesday, in a continuation of the bullish pressure that had been part of the market on Wednesday. At this point, the market then rolled over near the ¥118 level, then reached down to the ¥117 level during the day. Overall, the market has been in a downtrend, so it makes sense that this has happened.

Risk appetite

The overall risk appetite in the world continues to press money towards the Japanese yen. With the euro being in the midst of problems with Brexit, this looks to be a “backdoor way” to play the idea of dwindling risk appetite. All things being equal, it looks as if we are going to go lower at the first sign of trouble – and there are a lot of them out there just waiting to happen.

The US/China trade talks, although not directly affecting this pair, will have a certain amount of influence by giving traders an idea as to what they can expect, going forward, with global trade. Things don’t look good, so it makes sense that the pair will continue to drift towards the lows again.

Technical analysis

EUR/JPY chart

The technical analysis for this pair is rather straightforward as the moving averages that are on the chart continue to drop. The 50-day EMA is just above at the ¥118.50 level; the 100-day EMA has sliced through the ¥120 level and continues to drift lower. Beyond that, the 200-day EMA is currently at the ¥122 level, which will determine the longer-term uptrend. At this point, it’s highly probable that markets will continue to find plenty of downward pressure, so rallies will more than likely offer nice selling opportunities. In fact, it’s not until the ¥120 level gets broken on a daily close that the trend can possibly be thought of as being changed.

the pair has been in a downtrend for quite some time, so expectations should probably be a bit tempered

To the downside, the ¥116 level offers support, but a break down below there will also find psychological support at the ¥115 level. Keep in mind that the pair has been in a downtrend for quite some time, so expectations should probably be a bit tempered.

The trade going forward

The trade going forward is quite simple for this pair: on signs of exhaustion after a few quick rallies, selling should be the first thing you should think of. A break down below the ¥117 level is also a selling opportunity, as it would break through a psychologically round figure. Keep in mind that the level has been very resilient, and therefore it’s a rather significant event if it does in fact happen, going forward.

Written By
Alan Penny

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