The Euro is about to break out to the Japanese yen in a major way, or is it?
The Euro is rallying to the Japanese yen, as comments from the Bank of Japan which remains committed to its 2% inflation target are triggering a sell-off in the Japanese currency and are resulting in a very serious repricing of risks associated to holding yen these days.
We would be looking for opportunities to buy daily calls on the EUR/JPY pair today with our main focus points centered at levels around the 138.10-15 area. Should we reach those in today's trading session we have to keep a close eye on the hourly closes.
If we see a test of the level and an hourly close above it we would be buying daily calls on the EUR/JPY at 138.10, however if we see a close below we would be waiting for a test of the 137.60-70 area once again to purchase our binary options on this particular forex pair.
The main reason for the developments is the policy of the Bank of Japan which is currently issuing new currency at the fastest rate of all major central banks. Last year we have already seen a serious depreciation of the yen, now it's apparent that this trend is going to continue for a while.
Many analysts have voiced their opinions on the topic and quite several have expressed their views that there is no easy way out for the Japanese economy. The way out of the country's very high debt, is to print more yen to pay it back.
This is why the Japanese yen is very likely to depreciate materially as the local investors are moving their assets away into more higher yielding and higher quality assets. This year the move is rather slow, but this could accelerate to epic proportions and lead to a very serious rebalancing on the forex market.