EUR/JPY bearish trend to continue

<p>I remain bearish on the euro in the medium-to-long-term for mostly fundamental factors. As I want to take a longer-term view, all I need to […]</p>

I remain bearish on the euro in the medium-to-long-term for mostly fundamental factors. As I want to take a longer-term view, all I need to do is find a currency that has strong technical or fundamental factors to trade with against the euro. So for me, it’s just a process of elimination.

I’m still a long-term bear of the EUR/GBP but am scared off this pair for April for fear the UK general election could upset what I see as fairly transparent dynamics (a weak euro and strong pound). I worry that the election uncertainty could hurt the pound in the short term. So for April, I am staying clear of trading the pound.

So I move onto the EUR/JPY and for me, the continuation of its long-term bearish trend remains prudent. There are technical and fundamental factors that convince me of the yen’s strength against the euro.

On a technical front, the euro’s failure to consolidate above the Y131.50 level is an important resistance barrier that must be broken before further upside can prevail. This convinces me that more downside and a revisit of the Y127.00 major support level could be on the cards.

On a fundamental front, as my colleague Ashraf has previously said, Japan’s increasing export competitiveness will make its currency more in demand as purchasers abroad need yen to buy Japanese goods.

So this looks to me as a fairly confident trade setup. An upside break of the Y131.50 barrier, however, would change my thinking on this pair.

EUR/JPY DFT chart

 

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