FxWirePro: Euro/Yen squeeze, breakout ahead

Sharp rise in Yen over risk aversion this year has led Euro/Yen pair dip to lowest level since April last year, when Euro was declining following the announcement of European Central Bank (ECB) will start purchasing government bonds from March.

This time however, the drop was largely due to sharp rise in Yen, following the announcement by Bank of Japan (BOJ) to increase asset purchase by just ¥300 billion, which is miniscule by current ¥80 trillion package. While we are long over Yen, with target around 114 per Dollar, we believe Euro/Yen might have run its downward course for the time being.

Though, ECB meeting is coming up on 21st, no firing is expected after market disappointing measures in December. We also expect, FED to be relatively dovish, in its upcoming meeting later the month. So, Euro has lot of ground to recover. We are also long on Euro, with several upside targets around, 1.104, 1.13 and 1.15 against Dollar.

As ECB is holding its fire, pace of divergence might have run its course.

Trade idea 

Technically speaking, Euro is yet to confirm its upside move, so once confirmed we would present you with the targets but for now, Euro/Yen pair is getting squeezed since 7th January, as shown in the figure in smaller timeframe and breakout ahead is likely.