Forex: EUR/JPY breaks 106.00; 105.70 targeted (Barcelona) - The EUR/JPY has extended its technical correction beyond the round 106.00, bringing now Nov 23 low at 105.70 into play. The lowest so far can be found around 105.80. According to Sean Lee, founder of FXWW, “there is increasing danger that trailing downside stops start coming into view, and I suspect that there could be plenty of stops below 105.70..."

In favour of a follow through sales is the fact that EUR/JPY has finally broken a pattern of 11 consecutive days of higher lows on the daily, with the breach of 106.00 setting the stage for mentioned 105.70 ahead of 105.50, April 10/11 lows. On the upside, offers will likely be clustered between 106.15/20, European/American lows. Recovery +106.50 necessary to re-challenge 107.00.

Shanghai Composite Index has penetrated into fresh multi-year lows, getting now closer to GFC lows. If we add into the mix lack of clarity in the Greece debt deal, little progress in the US fiscal cliff and exceedingly overbought readings in all Yen crosses, one may reasonably expect that the move lower in EUR/JPY may have some more legs to go before Yen hits value-areas to be sold.