By Jake Fillipp
The market's initial knee-jerk reaction to the FOMC rate decision has left the carry-trade in an interesting spot, namely the EUR/JPY. After the August melt-down in the equities markets and carry trade, this currency pair has curiously had a series of lower highs and higher lows. This sort of compressive price behavior could be indicative of a battle royale between bulls and bears in the carry trade, and the resolution could offer some opportunities to the astute trader. After the double top at 167.70 put in place in October and November the pair was unable to close above the .618 Fibonacci retracement level from the November swing low of 158.70 at 164.30. A break below the lows last week of 161.00 and the rising daily trendline dating back to early September currently around 160.20 could see a quick and extended decline in this pair. The next level of support comes in at around 159.50, followed by 158.60. Below those levels and it could be lights out down to 155.00. However, the daily trend line will be key and could prove to be a level of support for this pair, especially if equities can stem any further declines. With recent futures positioning data released by the CFTC indicating that speculators are about as bullish on the Yen as they have been in the past couple years, it will be interesting to see how much ammo they have left to drive the Yen higher.
EUR/JPY 500Daily Chart
Charts courtesy of FX AccuChart
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