Potential signal:

this is a long-term bullish trend that I think has a lot further to go. At this point, I’m willing to buy here and I would have a stop loss below the ¥176 level. I would target at least the ¥172 level, if not ¥175.

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• The euro has rallied significantly during the trading session on Friday, as we continue to see the Japanese yen suffer at the hands of other currencies.
• Ultimately, this is a market that I think will continue to see a lot of upward pressure, and I do think that given enough time we will see traders take advantage of the interest rate differential which of course is going to continue to get you paid at the end of every day.

Short-term pullbacks continue to be buying opportunities, and this is especially true after we have seen the massive hammer on Thursday that should just tell traders that every time we pull back, there should be plenty of buyers willing to take advantage of getting paid swap at the end of the day. Furthermore, the Bank of Japan has no real shot at changing the trend, despite the fact that it intervened recently. After all, the interest rate differential continues to attract a lot of people putting money to work. Short-term pullbacks almost certainly will continue to offer opportunities for people to get even bigger in their position.

Technical Analysis

The technical analysis for this pair is obviously very bullish, and the fact that we ended up forming that massive hammer for the trading session on Thursday suggests that any opportunity that people get to get involved in this market and take advantage of “cheap euros”, they most certainly will. It also helps that the euro has been rallying in general, so the fact that the Japanese yen is a funding currency makes us an even more appealing longer-term trend.

On the upside, I see the ¥170 level as a potential psychological barrier, but at this point in time it’s obvious that the Bank of Japan can only do so much, and therefore I think you get a situation where the market is going to continue to punish the Japanese for their horrible monetary policy, and I think this is a situation where this is a one way trade, and quite frankly I would invite the Bank of Japan to get involved in short this market through intervention, so I can get long from an even lower level.

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