EUR/JPY rocketed higher late last week as hopes for a Japanese rate cut, fear of intervention and receding risk aversion all helped prompt a sharp rally in EUR/JPY which took the cross from 113.61 as high as 131.03. We’ve since backed off with the markets slightly disappointed over the smaller than expected 20 bp cut by the BOJ and a broad USD rebound after a Wednesday/Thursday spasm of weakness.
All of that crazy price action has seen EUR/JPY rise from well below its 10 day moving average (it was 14 yen below Wednesday to somewhat above on Thursday when it topped out at 131.00 Now we are easing back toward a steeply down-sloping 10-day average from above at 124.75.
If markets are indeed becoming less volatile, as they would appear to be in the aggregate, a period of consolidation +/- a few yen should be seen around 124.75 for the next day or two. Lets call the base 122 and the top 126.25 the top.
With the US election tomorrow and the market’s confidence that it already anticipates the outcome and unemployment on Friday, this would seem to be as a good a time as any for markets to settle down into a consolidation ahead of Friday’s event risk.
