Risk Appetite Bolster Yen Pairs

The Japanese Yen is weak against all other most-traded currencies, demonstrating market sentiment favoring riskier currencies. Japanese Yen is traditionally considered a safe-haven currency, and it tends to appreciate when there’s risk aversion in the market. The positive outlook for vaccine rollouts and fiscal stimulus in various countries, especially the United States, contribute to this risk appetite rally.

Japan’s recently better-than-expected economic data further added to the market’s optimism. Japan’s latest GDP expanded by 3% in the fourth quarter. This is better than the median estimate of 2.4% by analysts. Annual GDP rose by 12.7%, which is a far bigger increase than the 9.5% expectation by economists. Below we will take a look at the technical picture of EURJPY

EURJPY Weekly Chart

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The weekly chart above shows a higher high (bullish sequence) since May 2020 low. A 100% – 161.8% Fibonacci extension in (A)-(B)-(C) can see the pair continue to extend higher towards 134.3 – 142.1. We can also see that the pair manages to break above the long-term bearish trend line from the 2014 peak, bolstering the view that the pair can see more upside. In addition, there’s a horizontal support/resistance line around 127.3. A close above the level on weekly basis could suggest continuation higher with a limited downside to around 126 – 127 if there’s a pullback.

We managed to buy the pullback at 125.2 when pair retested the broken trend line from 2014 high in 3 waves ((a))-((b))-((c)) as the chart below from January 18 shows:

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Euro Yen Elliott Wave chart

A month later, we are now at 128 as the 4-hour chart below shows and we remain long EURJPY with a risk-free position.

(Click on image to enlarge)


Disclaimer: Futures, options, and over the counter foreign exchange products may involve substantial risk and may not be suitable for all investors. Leverage can work against you as well as for ...

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