EUR/JPY Forecast 20/01: Trade Tensions Spark Selloff (Video)

(MENAFN- Daily Forex) The Euro recovers against the Japanese yen after opening drama and noise about trade agreements.

The Euro has gapped lower against the Japanese yen at the open on Monday, only to turn around and recapture that, as well as grind even higher. We are above the 184 yen level as I record this, which is a good sign. That being said, we need to take a look at what's going on to understand why the 183 yen level offered support.

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There was quite a bit of noise over the weekend as far as the US and the European Union busting up trade agreements, and of course, the first thing that traders do is panic. That being said, those who are not weak or drama-filled typically will look at these movements as an opportunity. And that's exactly what we've seen here.

Interest Rate Outlook

The European Central Bank is still stable in its interest rate outlook, and that's not going to change whether or not Trump and Macron or whoever start getting into arguments through the press. The reality is that the European economy is about where the ECB needs it to be, while the Bank of Japan has the problem of dealing with the idea of massive amounts of debt and their rates skyrocketing, which generally would be good for the yen, but the problem is it's not in a controlled manner.

EURUSD Chart by TradingView

There is a Bank of Japan meeting later this week that will come into play, but at this point, the Euro has just offered a buying opportunity against the Japanese yen, as you have seen. This remains a bullish pair. It will remain a bullish pair for quite some time. Markets do not turn on a dime, especially when it's a repeated headline of trade tensions. We've been going through this for a year now. All things being equal, we continue to grind to the upside, and I think we will go looking to 186 yen sooner or later.

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