Marshall Gittler
Trading Analysis
EUR/JPY
The dollar traded mixed against the other G10 currencies during the European morning Tuesday. The greenback gained against CHF, AUD and NZD, in that order, while it was lower vs NOK, JPY, CAD and GBP. EUR and SEK were the currencies which had a relatively quiet morning.
The only noteworthy release we had so far was the German Ifo survey for August. All three indices unexpectedly rose from July, confounding expectations of further declines. The expectations index, although it was above the forecast, it declined from the previous month similar to the weak expectations index seen in the ZEW survey. The overall improved Ifo survey helped to recede fears over Germany's recovery path and Eurozone seems to be on track to gather momentum in Q3. At the time of the release, EUR/USD declined a bit, only to find some buy orders slightly above our 1.1500 support level. The rate subsequently jumped towards 1.1550 and maintained its choppy price action established in the Asian trading session. We will need to see the pair breaking either above 1.1625 or below 1.440 for any hope of a nice move into the end of the week.
EUR/JPY traded higher during the European morning Tuesday, after it hit support slightly above the 137.00 (S1) hurdle. As long as the rate is trading above the uptrend line taken from the low of the 9th of July, I would consider the outlook to be cautiously positive. However, I would like to see a clear and decisive move above 139.00 (R1) before I get confident on the upside again. Such a move would confirm a forthcoming higher high on the daily chart and perhaps set the stage for extensions towards the psychological round figure of 140.00 (R2). Our short-term oscillators support the somewhat positive picture as well. The RSI edged higher but hit resistance slightly above its 50 line, while the MACD, although slightly below zero, shows signs of bottoming. Furthermore, there is positive divergence between both these indicators and the price action.
Support: 137.00 (S1), 136.00 (S2), 135.50 (S3)
Resistance: 139.00 (R1), 140.00 (R2), 141.00 (R3)
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