I have long said that EUR/JPY
is one of my favorite recession trades. With the Eurozone in a recession and
the need for the European Central Bank to step up to the plate and lower
interest rates, the rate differential between the Euro and Japanese Yen will
close and close rapidly. Furthermore, as US equities continue to tumble, EUR/JPY
will follow suit.
But what I really like about this currency pair is that it is breaking out of
a recent consolidation to the downside. As indicated by the chart below, the
currency pair has entered the “Sell Zone” which I determine using Bollinger
Bands. That level coincides with triangle support and the 23.6% Fibonacci
retracement. As long as the currency pair does not rebound and take out close above today’s high of
120.47, I think it’s headed to 115 and maybe even lower.
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