- The euro has exploded to the upside against the Japanese yen, which does make a certain amount of sense considering that the Japanese yen is taking quite a beating during the trading session, and I think this is a major breakout just waiting to happen.
- All things being equal, I think you have to look at this through the prism of the situation that the Bank of Japan, which is one that they cannot do much about tightening monetary policy.
Now, it wouldn't surprise me at all to see a little bit of a pullback, but as long as we don't break down below this massive candlestick for the day, I think we're in pretty good shape. The euro could very well go looking to the 167 yen level where the next cluster is. Quite frankly, the US dollar has skyrocketed against the yen and it's causing quite a bit of chaos in these other pairs.
Interest Rate Differential Remains Important
In general, this is a situation where I think you are looking to take advantage of the interest rate differential, although admittedly, it's not as strong in this pair as it is some others. But we do also have the PMI numbers out there coming out of Germany, and that could have a major influence, but unless it's absolutely horrific, I suspect that any pullback is a nice buying opportunity.
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We have broken above a major resistance barrier, and I think perhaps it's time to admit that the carry trade has returned. This massive W pattern, of course, is a very bullish turn of events, and I think you have to suspect that a lot of carry traders have come back and they're willing to take that money at the end of each and every session. This will continue to be important, and what I think will be the biggest factor going forward in this market, as well as most other JPY-related pairs. Because of this, I have no interest in shorting this market anytime soon.
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