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EUR/JPY Forecast 30/01/2014

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EUR/JPY Chart 30 Jan 2014
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The Euro is licking its wounds caused by low German inflation numbers

As we are drawing closer to the end of the week we are observing a steady flow of new information about the performance of the Euro Zone economy and German data today was very disappointing. We are biased to buy puts, however have in mind that the weekly support line is very close at 138.70-80.

The ECB will have to say something real about low German inflation this time - at the January meeting Mario Draghi chose to downplay the data and almost pronounce it seasonally and statistically distorted. With even lower numbers this month, deflation seems to draw closer.

Ho will the ECB react? Well you only have to look at the EUR/USD exchange rate to figure out what the market thinks. Looking at the rate at which the single currency is dropping today against the Greenback should give you some clues about the moves in the EUR/JPY binary options forex pair.

We have tried a test to the downside below 138.90 in the morning, however that has failed and the pair has been slowly clawing higher towards the closing of the European trading session. As the US fully kicked in we are seeing renewed selling orders that have driven the price to current levels around 139.30.

To take our next decision on this pair we will have to figure out a proper level to trigger a trade. We would definitely start buying daily put options on the pair if it manages an hourly close below 138.90.

However our exposure would be small, because there is a very strong weekly level around 138.70-75 that could provide support. On the topside we could buy daily call options if the pair manages to close on an hourly basis above 140. We see this as unlikely at this point in time.

In fact we would risk to daily buy puts if prices move to 139.90-95. The space can change quickly of we see some positive earnings after the stock market closes at 09:00 GMT, when Amazon will rpeort on the outcome of their latest financial quarter.

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