1 comment

EURJPY Tests 138.00 As Risk Aversion Settles Ahead of BoJ

by on June 11, 2014 8:55 pm GMT
 

The euro-yen has continued its parabolic descent after failing to gain any momentum above 140.00, as the yen has hit four-month highs ahead of the Bank of Japan (BoJ) monetary statement. Yen futures have come off the session highs but still remain .33 percent to the upside. Pierpoint Securities global strategist Robert Sinche said the rally in the yen is a “setback in risk appetite.” With the exception of today’s price action, the US equities market have only closed lower three times in the last three weeks after achieving numerous new all-time highs.

There is a central bank policy divergence, too. The European Central Bank (ECB) has become the first major central bank to resort to negative interest rates in an attempt to stimulate the sluggish economy in the eurozone. On the other hand, it is expected that there will be no addition or reduction in the BoJ’s current quantitative easing policy in this week’s statement. In regards to the BoJ monetary statement, Sinche said “the markets have looked at the inflation numbers, the first-quarter growth numbers, and come to the conclusion that he BOJ would need a lot more data on the second quarter before they could justify further policy action.”

EURJPY has found momentary demand at 138.00, following collapsing through 138.60 on the 90-day 4H chart. The 20 EMA has tracked price action lower while acting as near-term resistance. However, the pair is fairly oversold with the RSI just above of 26. The +/- DMI bearish divergence is still substantial enough to support further downside, but the – DMI is pulling back and could support a short-term retracement.

A close below 138 would signal further downside movement to 137.45, while a pullback could challenge previous consolidation at 138.45/50 prior to testing former support at 138.60.

4H Chart of EURJPY

4H Chart of EURJPY

  • On Wednesday, June 11, 2014, pent-up disinflationary pressures released as global debt deflation commenced, as the chart of the EUR/JPY currency carry trade showed a strong turn lower, as the currency traders called the Yen, FXY, higher, and the Euro, FXE, lower, on the failure of trust in the monetary policies of the world central banks to continue to stimulate investment gains, as well as global growth, with the result that investors derisked out of World Stocks, VT, Nation Investment, EFA, Global Financials, IXG, and Dividends Excluding Financials, DTN, and by which the world passed through an inflection point and entered into Kondratieff Winter, the final phase of the Business Cycle, where regional fascist leaders rule in diktat, to establish regional security, stability and sustainability.