Speculation about a fix of the Euro zone crisis has been playing out in the markets ever since Super Mario recently gave the all clear. But from a look at the Euro/Yen cross it has been expected since late July. The chart below shows the bottom for the pair, which hit July 25 followed by a steady rise in the Euro at the expense of the Yen since then. The Fibonacci levels on the chart show the 23.6% retracement gave it some pause but then broke through the 38.2% level toward the 50% level, where it rejected. Does this mean the run is over? Maybe. A retracement back to the 38.2% Fibonacci just under 101 seems likely now and a move through would be a strong signal that the Yen will continue to strengthen.
EUR/JPY" title="Fx EUR/JPY" width="600" height="600">
A hold at that level and turn back higher is a signal that party is back on. What party do you ask? The party in Equities, globally. It had long been a good proxy for the risk taking in the markets prior to the financial crisis. And for those that play the currencies you will note that the Euro Yen has some catching up to do. When the markets turned it was quick to follow but then diverged through July. Keep an eye on this pair as another barometer of the strength of the Equity Markets.
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