EUR/JPY Volatility Creates Potential Trades Amid Yen Carry Trade Uncertainty

The EUR/JPY currency pair is experiencing significant movement as traders continue to watch the yen carry trade. This market volatility has created two potential trades for investors.

The euro fell against the Japanese yen on Tuesday, reaching levels near ¥178, an area previously considered a support level. It's likely that this area will continue to provide support in the future. However, if the pair breaks below ¥177.50, it could open up the possibility of a move down to ¥176.

Rallies at this point are possible, but they would require an increase in interest rates in Europe, particularly in Germany. If this happens, it could send the pair towards the ¥180 level. However, Christopher Lewis notes that 'this is a market that I think remains very noisy and very choppy.' The fear of Bank of Japan intervention is a significant concern for traders.

The 50-day EMA has broken below the 200-day EMA, creating questions about the so-called death cross. If the pair breaks below ¥177.50, Lewis might be tempted to short. However, if it breaks above ¥179, he might consider going long for a short-term trade.