Buyers of euro fixed the profit but growth potential remains

28 October 2022 98
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The EURJPY pair doesn’t grow as actively as the widely commented USDJPY pair. But even here there is room for renewal of multiyear highs. A week ago, another eight-year high of 148.4 was set. After that, quotations tried to be corrected, supported by new foreign exchange interventions by the Bank of Japan. However, the fall was limited to the level of 145.5, from which EURJPY is moving up again.


Yesterday the price tested the point of 145.5 second time last week but still held up higher. The reason for fixing profits in euros was the outcome of the ECB meeting. There were no surprises: rates were increased by 0.75%, and now the key rate is 2%. The European regulator was desperate to catch up with other major central banks which have already raised the rate higher than 3% and Fed can reach the limit of 4% next week.


This is a reason why lagging in the pace of monetary tightening the euro looks weak this year against almost all other leading currencies. But there is one exception: the Bank of Japan continues to adhere to an ultra-soft policy with a negative key rate of -0.1%. And against the yen, the euro has every chance for continued growth.


The main risk in trading against the yen is the probability of unexpected exchange rate intervention by the Japanese regulator. Therefore, for greater reliability, we can consider buying EURJPY closer to the level of 145.5.


In general, the tactics of strong buyout drawdowns after currency interventions are quite effective. As long as the Bank of Japan doesn’t decide on monetary tightening, the yen's weakening trend will continue. Well, other central banks should stop increasing rates, but it won’t probably happen until the beginning of next year.


The following trading strategy option can be suggested:


1) Buy EURJPY on the actual price. Take profit 1 — 147.7. Take profit 2 — 148.4. Stop-loss — 145.5.


2) Buy EURJPY on the fall to the level of 145.5. Take profit 1 – 147.7. Take profit 2 — 148.4. Stop loss – 144.6.


 Also, traders can use Trailing stop instead of fixed Stop loss at their disposal.

 

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