EURJPY: Still Trapped in Triangle

The latter half of the North American trading session was much less thrilling than the first as the USD pwned everything else to start the day only to settle down substantially to end it.  As much as the USD gained against everything, it seemed like the EUR lost just as much vs. the majors; the EUR/USD being the prime example.  However, the EUR/JPY, which has been trapped in a triangle pattern similar to that of the EUR/USD before today, failed to break out of that geometric pattern and remains trapped as we fade in to the Asian trading session.

Perhaps one of the reasons the EUR/JPY is more subdued than its cousin is that Japan has a variety of important economic reports being released this evening.  Just like the US and Canada, Japan is releasing inflation data that could impact the course of thought for the Bank of Japan.  There have been reports from the BoJ that they believe additional monetary measures may not be required by them moving forward, but if inflation falls more than anticipated, they may have to reassess that opinion. 

In addition, Household Spending and Retail Sales are scheduled for release which could influence the timing of the next consumer tax increase suggested by Japanese Prime Minister Shinzo Abe’s economic plan lovingly dubbed Abenomics.  Since the first tax increase that went in to effect in April 2014, Household Spending has decreased every single month and is expected to do the same this time around to the tune of -4.0%.  While Abe has already kicked the increase can down the road further, he may look to lean on the BoJ to increase their spending even more.

If these Japanese economic releases conspire to suggest that more needs to be done with Japanese monetary policy, even the negative feelings surrounding the euro may not be enough to withstand those same feelings toward the yen.  Considering the EUR/JPY is down toward the bottom of its triangle, perhaps support could be found at this level to give the pair a boost to return to the top of its confounding triangle.  If it breaks its bounds, the next level of support for the pair resides near 132.60, which is the 61.8% Fibonacci retracement of the recent significant low to high.

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Source: www.forex.com