EURUSD found some support yesterday as Eurozone bond yields rose and the cross currency basis recovered from a five-year low. There is little data of importance on the Eurozone economic calendar heading into Xmas.
But there is still one potentially significant event for USDJPY, namely the Bank of Japan monetary policy statement on Thursday.
Analysts are not expecting any change to the yield curve control parameters at this time but with fewer bond purchases being needed to hold the curve steady over recent months, the statement could make some adjustment to the monetary base expansion target.
However that would be seen as a tapering of the QE program and the bank may not want to give such as signal yet, especially with inflation still missing in action.
This will be my last posting for the year. Tomorrow I will be turning off the screens for two weeks to recharge my trading batteries. Back again early January.
Management and risk description
For the past three months EURJPY has been locked within 131.35–134.50 Rectangle corrective consolidation.
Individual “Commitment of Trader” report profiles indicate that the commercials have a near record short position in the EUR and an historically large long position in the Yen.
From an Elliott Wave perspective, a case can be made for an ultimate break in either direction and I would “respect” and trade any decisive break of this range accordingly (refer below).
Entry: For the remainder of this year only: EURJPY is seen as a Buy on any break above 134.60 and a Sell upon any break below 131.25
Stop: 60 point Stop, initially
Target: 137.40 on the Upside and 128.50 on the downside
Time horizon: Allow several weeks at least for target to be met
EURJPY Daily Chart (click to expand)
EURJPY weekly chart (click to expand)
Source: both charts, ThomsonReuters
— Edited by Adam Courtenay
Non-independent investment research disclaimer applies. Read more
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