If you trade the EUR/JPY you are a real trader, this is a fast moving market leader and research is important at the technical and fundamental level, but there are few pairs as exciting to trade as this one.

Economist Shayne Heffernan has a 110 target here.

The Bank Of Japan has followed in the steps of the Fed in easing monetary policy, increasing its asset purchase programme by 10 trillion yen as it sought to avoid recession. The programme, which is centred on purchasing mainly Japanese Government Bonds (JGB), will see the additional 10 trillion yen split evenly into both JGBs and treasury bills, with an extension of the programme until December 2013 from June 2013.

The programme, now standing at 55 trillion yen following the additional firepower, also saw enhancements via the removal of minimum yield guidelines, previously the central bank had on occasion failed to secure targeted amounts of debt, which should enable the central bank to secure both government and corporate bonds at amounts it deems appropriate.

Given that the outlook for Japan is still precarious as growth has ‘come to a pause’; further easing could be on the cards as the central bank could be looking to further boost credit in its domestic market as well as weaken the Japanese yen in an attempt to make the nation’s exports more competitive.

EUR/JPY retreated from 103.86 last week but was but managed to hold the 99.52 support support. It is a tough call this week but the support level at 99.52 looks strong.

Should the pair break above 101.04 then a fast run to 103.86 would be expected.

On the downside a break of 99.52 will should see it test the 97.98 support.

In the bigger picture, we’re favoring the case that whole down trend from 169.96 (2008) has completed at 99.11 already, on bullish convergence condition in weekly MACD. Focus is now on 111.43 key resistance level. Break will confirm this bullish case and bring further medium term rise to 123.31 and above (38.2% retracement of 169.96 to 94.11 at 123.08). And, we’d favor this bullish scenario as long as 99.52 support holds. Though, considering that EUR/JPY can’t take out 55 weeks EMA decisively yet, break of 99.52 will favor another low below 94.11 instead.

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In the long term picture, the down trend from 169.96 is viewed as a corrective move even though it’s very deep comparing to the rise from 88.96 (00 low). It could either be a correction or part of a consolidation pattern but that’s not too relevant as the range of 88.96/169.96 is so large. The relevant point is that we don’t anticipate a break of 88.96 low. And hence, reversal should be around the corner.

We think the support level below should be massive, and as a result we think eventually we will get an opportunity to go long of this market and aim for quite a bit target. In fact, the 100 handle was the site of a recent breakout and now that we have fallen back to it we need to see supportive action. So far, it has been.

Based upon the longer-term charts, we think that there is a real significant chance of seen this market move up to the 105 level. Above there, we see the 110 level as the next logical target. We don’t know whether or not will get that high in this market, but the 105 level seems a very feasible at this point if we can get a little bit of traction.

 

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.Read the Terms of Service

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