Eye On Japan: What Is Shinzo Abe’s Next Move? $EURJPY

Yesterday, the euro rallied after multiple manufacturing PMI readings surprised and the euro-zone as a whole emphasized a climb to 48.3 points. This morning the euro received another boost from one of its weakest members. Spain, known for its 27% unemployment in the first quarter, saw its jobless count fall 98,265 in May. This is welcomed news as last Friday saw unemployment in the euro-zone rise to a record 12.2%.

Wednesday we will find out what is Shinzo Abe’s third arrow of his growth strategy. The first arrow was fiscal stimulus and the second arrow was monetary stimulus. Markets are expecting deregulatory measures that include corporate tax breaks and foreign incentives. This third arrow should solidify Abe’s reign and if he wins the July 21st election for the upper house, the Liberal Democratic Party may reign supreme for another three years.

The daily chart of euro/yen (EUR/JPY) is displaying a remarkable strong and steep bullish that finally has shown signs of stalling or correcting. On May 22nd, price may have formed a bearish ABCD pattern that could see weakness move towards the 128.00 level, which is also the 38.2% retracement of the C to D leg. If this level holds up, the pair could establish the lower boundaries of a potential summer range. Eventually, by year end, we will anticipate a rally towards the 137.50 region.

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Edward J. Moya is the Chief Market Strategist for edmoya.com, an educational website for foreign exchange and commodity traders. He has over 15 years of investment industry experience in forex, stocks, options and futures. At edmoya.com, Mr. Moya writes daily currency and commodity analysis and has authored numerous articles on trading using both technical and fundamental analysis for major financial publications. He is a contributor of technical and fundamental analysis in currencies and commodities to SFO, Market News International, and Forex Factory.

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