Euro searching for support against Japanese yen

Alan Penny

23 May 2019

3 min read


The Euro had a rough beginning to the session on Thursday, falling rather hard against most currencies, and the Japanese yen of course was no different considering that it is considered to be a “safety play.” However, later in the day as the Americans took over a lot of that panic abated, and we started to see a bit of stability come into the marketplace with all risk assets. With that being the case it makes sense that we have seen a bit of a bounce from here as the EUR/JPY pair is sensitive to risk appetite.

EUR/JPY at major level

The Euro fell rather hard during the trading session but fell right into a major support level in the form of the ¥122 level, and of course the 61.8% Fibonacci retracement level. That is an area where there are plenty of buyers based upon previous action, and that is of course an area where we need to pay attention to. The fact that we have bounced from there is a good sign, but there’s obviously a lot of resistance above that could get into the way.

All things being equal though, it looks as if we are trying to build a bit of a base, and that of course is a good sign. If we can get stock markets around the world rallying a bit, that could help this market as money will flow away from the Japanese yen, and that of course means that it will look for higher returns in places like the European Union.

eur/jpy chart


That being said, there is a lot of trouble out there

All that being said, there is a lot of noise and trouble out there that could throw this market around. If that’s going to be the case, it isn’t going to be easy to rally from here. However, the risk to reward ratio is great, as we could go as high as ¥124.50, and recognize that a break down below the ¥122 level would be reason enough to get out and perhaps even start shorting. If that happens, you will know that we need to start selling the risk appetite induced markets, because you will see selling in stock markets, metals, and the like. It will simply be a complete “risk off” trade out there for global traders in general.

The main take away

The main take away of course is that this market will move according to the risk appetite in the whims of the financial markets overall. We have seen the lot of trouble, so it’s not overly surprising that we have broken down the way we have, but we still have a bit of a gap above that needs to be filled that is also my target, so at this point we need to see whether or not the ¥122 level will hold. At this point, it’s a simple binary trade. We either stay above there we don’t. If we don’t, then we simply reverse the trade.

Written By
Alan Penny

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