- The Euro has rallied a little bit during the trading session here on Friday as we continue to build a bit of a bullish flag.
- I think this is a candlestick formation that pretty much everybody can pay close attention to and see quite obviously.
- What I find interesting about this bullish flag is that the 50 day EMA sits just below the 170 yen level, which is also the bottom of a part of the bullish flag that people would expect to offer support.
- If we can break to the upside, the 173 yen level is a resistance barrier and target. And if we can break above there, then I think the market is likely to go look into the 175 yen level.
If We Were to Break Lower
On the other hand, if we were to break down below the 50 day EMA, then I think you will probably see this market drop pretty significantly, perhaps down to the 166 yen level. Keep in mind that this is a risk appetite based currency pair, and the Japanese yen of course is represented by the Bank of Japan, which has a major issue on its hand.
In other words, it has to deal with the bond market in Japan, which is horribly unsubscribed to on some days. And in fact, there’s been days where there’s been zero bids for Japanese debt. So, with that being said, it’s not a surprise to see that the yen is struggling against a lot of currencies. And in fact, it’s even starting to struggle a little bit against the US dollar, which of course has been sold off by pretty much everybody.
So, if we can break above the 173 yen level, I can imagine a scenario where we rally another 1000 pips to about 183, maybe 182, we’ll just have to wait and see. But this is obviously a market that you get paid to hang on to as far as interest rates are concerned. So, I like buying dips, I also like buying breakouts.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.