EUR/JPY outlook for the week ahead: Bullish whilst above 106.50
The market has been short EUR for some considerable time so the combination of Yen pre-election bearishness and EUR short-covering has been really compelling. There were two sharp surges on Friday in Asia, starting at around the 106.50 level, and as long as this level holds then the bulls remain in control and are targeting 111.50 again. If we break below 106.50 then I’d suggest that the severely over-bought indicators might start to turn over and put the pair in line for a clean-out of long positions. We can expect plenty of volatility with risk sentiment swinging on events like the Chinese PMI; Australian retail sales, rate decision and jobs data; European PMIs; and of course the US NFP data. Play a 106.50/108.00 early in the week and a break of this range will set up the next impulsive move.