Yen Gains Momentum Against Euro
Of all the combinations that the four major currencies can make, one of the most neglected is the EUR/JPY. Trading the euro against the Japanese yen also happens to be one of the most interesting currency pairs out there right now, in both the traditional Forex market and as a binary options trade.
The reason why this pair has so much appeal and interest right now is because it looks very weak from a structural standpoint. Both European and Japanese central banks have had recent flip-flops of policy and opinion, and both have been struggling on the international front against other currencies. Just look at a chart of either of these currencies in comparison to the U.S. dollar right now if you need any further evidence of this. The USD has been unusually strong for quite some time now, and the euro and the yen have struggled for months, even years, depending upon the metrics that you are using to test for strength. However, when you pair these two currencies together, you create a situation where minute details become very important. Some traders might despair at a trading situation like this and go look elsewhere. Strong traders should cherish this opportunity, though, because it makes the nitty gritty technical analysis that Forex traders thrive on that much more accurate in predicting an outcome.
As of right now, the yen is gaining momentum against the euro. The asset has had both the 8 day and the 21 day exponential moving average fall into bearish territory. For currencies, which are bought and sold for the short term more often than other assets, these are far more accurate timeframes for EMA usage than the 50 and 200 day EMAs which are used for stock predictions. You will also find that the slow stochastic and MACD indicators for this currency pair also point to the yen being stronger than the euro. The most recent week closed with this asset at 130.745, but indications seem to say that the yen will be getting stronger.
As stated above, the U.S. dollar is a good tool to use in comparing the euro to the yen if you want to move beyond just the EUR/JPY price chart in your analysis. For example, one simple strategy involves looking at EUR/USD and USD/JPY charts and seeing which has the greatest percentage of change. It’s a must that you look at percentage change and not pips here. The USD pair that has the strongest resistance against the dollar is more likely to be the stronger currency. This is a very helpful shortcut if you are in need of a second (or third) opinion before you execute your trades. Because the dollar is semi-constant, this is a reliable indicator, although it should be mentioned that there is potential for gaps in time where the data is not translating at precisely the same moment. In other words, the USD/JPY pair might move before the EUR/USD pair does, depending upon which major markets are currently doing business. Take this into account when you are making your decisions.
As you trade this pair, take into account the tiny in comparison to this larger outlook. Again, having a long term framework for an asset’s outlook does not equal short term success. You will need to still analyze your trades thoroughly prior to entering a position and make sure that the indicators line up along with this longer moving trend. Most traders find success moving with the trend as it does increase the probability of success, but this is entirely dependent upon the strategy that you wish to employ.