EUR/JPY Breaks Above 185 Yen Level as Carry Trade Conviction Returns

The EUR/JPY currency pair broke above the 185 Yen level on Thursday, marking a significant resistance breakthrough. According to Christopher Lewis, a technical analyst at DailyForex, this development is driven by the carry trade, which has been in vogue for some time.

The Euro's breakout from the 185 level suggests strong conviction and continuation of its upward trend off the 50-day EMA. The interest rate situation favors Europe over Japan, with the European Central Bank being more inclined to raise rates than the Bank of Japan due to concerns about debt levels in Japan.

While central bank intervention remains a concern, Lewis notes that it typically only slows down a move rather than reversing it entirely. He also points out that the EUR/JPY pair has ignored the Bank of Japan's efforts to prop up the Yen in the past.