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EUR JPY Forecast Medium Term – ECB Press Conference on Tap


Jun.06.2017

EUR JPY Forecast Medium Term. The EUR/JPY pair appears to have formed a triple top chart pattern ahead of Thursday's ECB press conference, as the Japanese Yen chalks up gains across the board. With that, let's conduct an IDDA to take a closer look at EUR JPY forecast medium term. I'll be sharing my personal investment strategy in our investing group

 

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1- Technical Points - EUR JPY Forecast Medium Term

Daily Time Frame.  The EUR/JPY pair is currently testing the neck line of an apparent Triple Top chart pattern which falls on the 23%  Fibonacci level at 123.40. This level is especially important since it also falls on a previous resistance formed and tested multiple times during December 2016. From an Ichimoku Secrets point, the Tenkan line is just about to cross below the Kijun line.  The future cloud however is upward moving and thick.

EUR JPY Forecast Medium Term - Daily Chart Technical Analysis EUR JPY Forecast Medium Term - Daily Chart Technical Analysis

 

Supported by the upper band of the cloud, the pair opened Wednesday's Sydney session below the pivot point of 123.40.

 

 

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Monthly Time Frame. The pair has recently entered the monthly Ichimoku cloud, after bottoming out at the 113 support zone in October 2016. There are no specific signals on this end, besides consolidation, which calls for a potential range strategy for EUR JPY forecast medium term basis. The pair is currently at its long-term median level. Which is the price that has been tested the most in during the pair's charting history.

EUR JPY Forecast Medium Term - Monthly Chart Technical Analysis EUR JPY Forecast Medium Term - Monthly Chart Technical Analysis

 

On the weekly time frame, we recently had a bullish Ichimoku based signal. The pair has already reached the first and second Ichimoku - Fibonacci targets.

 

 

2- Fundamental Points

The second point of the IDDA suggests looking at the economic and political developments that could impact the currency pair.

EU Side: All eyes will be on European Central Bank (ECB) statement on Thursday at 11:45 am GMT, followed by Mario Draghi’s press conference at 12:30 pm GMT. The question is if the recent improvements in growth and inflation have convinced ECB gang to become more hawkish.

In the past month, euro zone’s growth, employment, trade, and business sentiment conditions have picked up. Not only that, but Macron winning the French Presidential elections also decreased the political risks in the region.

 

Fun Fact: Invest Diva group members reached their first medium-term bearish target in USD/JPY on Tuesday. Now waiting on NZD/JPY.

 

On the other hand, headline AND core inflation numbers significantly slipped in May, which supports the ECB’s plans of waiting to see broad and stable price increases before tapering its easy policies.

However the important thing to remember is that, many market participants have been anticipating hawkish (or at least less dovish) remarks from the ECB and the euro’s recent strength are showing that. It’s highly likely that the actual announcement could inspire a buy-the-rumor, sell-the-news situation.

 

 

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Japan: As political uncertainty loomed over the markets on Tuesday, traders rushed to buy the Japanese yen as a safe haven. This turn the JPY into the best-performing currency of the day. This was after Japan's Labor Cash Earnings came in better than expected during Tuesday's Asian session.

 

Coming up: Japan's Leading Index (APR P) on Wednesday at 5 AM GMT, followed by their  Gross Domestic Product on Thursday's Asian session at 11:50 PM GMT. On a YoY basis, Japan’s growth is expected to have ticked higher to 2.4% in Q1, comparing to last quarter’s 2.2%.

 

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3- Market Sentiment

Market sentiment analysis is the 3rd point of the IDDA. We typically take a contrarian view to crowd sentiment. Retail trader data shows 35.1% of traders are net-long EUR/JPY. In fact, traders have remained net-short since Apr 25 when EURJPY traded near 116.697; price has moved 5.7% higher since then. The number of traders net-long is 14.5% higher than yesterday and 31.0% higher from last week, while the number of traders net-short is 26.6% lower than yesterday and 15.8% lower from last week. The fact traders are net-short suggests EURJPY prices may continue to rise.

Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR JPY forecast medium term may soon reverse lower despite the fact traders remain net-short.

 

EUR JPY Forecast Medium Term - Strategy

As 4th point of the IDDA, you must calculate your risk tolerance before deciding on which trading strategy is suitable for your portfolio. We normally do not recommend trading without three or more confirmations of a specific direction from technical, fundamental and market sentiment points of view. Join us in our strategy development room by becoming a member of our investing group to learn more.

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Disclaimer: Forex is one of the HIGHEST risk investing instruments there is. If you don't have sufficient risk tolerance to trade forex, you can try investing other online securities.

 

Combining all points of the IDDA, here are Invest Diva's calculations for important approximate levels to keep an eye on.

Support Levels Turning Point Resistance Levels
120.43 123.43 127.43
121.67 125.61 129.68

 

 

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