Yen to Rise on Upgraded Economic Outlook of Bank of Japan

Japanese YenThe recent growth of 0.5% in GDP of Euro Zone and the victory of Emmanuel Macron in the French elections in Q1 has ensured a sharp Euro Dollar rally in the last few days.

On the other hand, the fading political uncertainty has decreased the demand for Yen. It has taken the currency pair EUR/JPY to a high figure of 125.82 earlier in this week. But we are hopeful that Yen is likely to recoup losses against the Euro currency in the coming weeks, and the reason for the same is discussed below.

The monetary policy meeting of ECB or European Central Bank is likely to be held on June 8 this year. Mario Draghi during the conference conducted in April presented an upbeat assessment of Euro Zone economy. The President further stated that deflation risks had mainly disappeared and there are signals of fast economic recovery of Eurozone.

On that basis, the market is speculating for a possible reduction in 60 Euro billion debt purchases made each month. However, the Lloyds Bank analysts believe that it is too early to expect such kind of shift and until the end of this year, the ECB is not going to taper the asset purchase program.

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Lloyds anticipates an announcement regarding tapering during the meeting scheduled to be held in September. It clears shows that the market is following the “buy the rumour and sell the fact” adage.

The ECB President Mario Draghi during his visit to the lower house of Dutch Parliament has defended the quantitative easing program, and it is too early to consider any tapering.

The interest rates are kept unchanged at -0.1% during the monetary policy meeting held last month, the Bank of Japan upgraded its growth outlook. The bank expects the Japanese economy to rise by 1.6% by the end of this year from January forecast of 1.5%. In addition to this, the bank expects CPI or Consumer Price Inflation to rise by 1.4% in the fiscal year 2017.

After facing resistance at 125.40, the currency pair has begun on its downtrend. A weak momentum is also indicated by the stochastic oscillator. Hence, a retest of 122.40 support is likely to be possible.

EURJPY Pair May 18th 2017

EURJPY Pair May 18th, 2017

At this point, a short position in the currency pair EUR/JPY is considered ideal. You can open the position near 124.60 and place the stop order above 125.40. Also, the short position can be covered around 122.40.

In the foreign exchange market, you can invest in a short position in this currency pair by investing in a put option where the strike price should be around 124.60 and choose expiry date somewhere around 26th of May.

Rich Archer

Rich Archer

Hi, my name is Rich Archer. I am living in London. Welcome to Binary Manual. Reach to Binary Options broker reviews and market news here.


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