EURJPY May Have Made A Short-term Top

Technical Bias: Bearish

Key Takeaways

• Euro managed to recover ground against the US dollar yesterday, but fell against the Japanese yen.
• EURJPY pair is likely to continue trading lower as the market sentiment does not favor more gains in the Euro.
• EURJPY support seen at 138.30 and resistance ahead at 138.80.

The Euro traded lower against the Japanese yen yesterday, and broke an important support area to solidify the short-term bearish trend which might take the EURJPY pair lower in the coming days.

Technical Analysis

There is an important triangle formed on the 4 hour timeframe for the EURJPY pair, which recently held the upside in the pair around the 139.30 level. The EURJPY pair after creating a short-term top around the mentioned level fell sharply and broke the 200 and 50 simple moving averages (SMA) on the 4 hour timeframe. However, the downside was contained around the 50% Fibonacci retracement level of the last leg higher from the 137.67 low to 139.30 high, which is a positive sign, but the RSI is now below the 50 level which can be considered as a divergence indicator. So, until the pair closes back above the 200 SMA (4H) it remains under bearish pressure, and the chance of a break lower below the 50% fib level to test the triangle support area is quite high. In that situation, if the pair breaks the triangle support area, then it would be tough for the Euro buyers to hold the downside around the previous low of 137.67.

Alternatively, if the pair bounces from the 50% fib level and closes above the 200 SMA (4H), then a run towards the triangle resistance area cannot be denied.

German and French Trade Balance Data

Two important releases are scheduled during today’s London session – German and French trade balance data. Let’s see if the outcome comes out positive and encourages the Euro buyers or not. If the outcome misses the forecast, then a test of the triangle support would be on the cards.