EUR/JPY 4H Chart 7/6/2012 7:14AM EDT
The EUR/JPY has traded in sideways action since early June. The support is seen in the 98.30-98.50 area, while the resistance is in the 101.40-101.60 area. The market is stalling just above the support level heading into the 7/6 US session with the 8:30AM EDT Non-Farm Payroll risk event on tap.
The question now is how will the market react to the NFP and what will be the subsequent technical development.
Will the market push below 98.30? This would open up the 2012 lows in the 95.60-96.60 zone. This scenario likely comes out lukewarm, yet not terrible NFP number. This would keep the data mixed, but not poor enough to stoke expectation of QE. Without risk-on support, the EUR can be pressured.
Otherwise, let’s see if a bullish reaction can push above 99.63-99.77 “central pivot” zone for the range in the 4H chart. Basically, if the market remains under this area, we may still have some of the bearish bias that kicked off July. A break above 100.00 would also break above July’s declining trendline and open up the 101.40-101.60 area again.
This bullish scenario is likely to come out of an expectation of QE by the Fed this year, which would counter-intuitively come from a poor NFP – a case where “bad news is good news”.