EUR/JPY Price Analysis: Bottom-trendline of bullish flag at 131.00 capped the downward move
- EUR/JPY is downward pressured, on the back of central banks pushing back higher rates.
- The market sentiment is upbeat, except for the FX market, as the Japanese yen and the US dollar appreciate.
- EUR/JPY: The bottom-trendline of a bullish flag caused a jump of 30 pips in the pair.
The EUR/JPY plunges during the day, down 0.83%, trading at 131.28 in the New York session at the time of writing. The market sentiment is upbeat, spurred by central banks of developed countries, pushing back higher rates. On Wednesday, the Federal Reserve announced the so telegraphed bond taper, but it was perceived as dovish. Additionally, on Thursday, the Bank of England (BoE) backpedaled their intentions of hiking rates as the market expected, keeping them unchanged, catching some investors out off guard.
That said, global equities headed by US stocks in all-time highs rallied. Contrarily in the FX market, risk-sensitive currencies fall, benefitting the safe-haven peers, like the greenback and the Japanese yen
EUR/JPY Price Forecast: Technical outlook
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The EUR/JPY pair briefly broke the bottom-trendline of a bullish flag but found buyers around the 131.00, bouncing off to current prices. The 50 and the 100-simple moving averages (SMA’s) are above the spot price, exerting downward pressure on the currency. However, the 200-SMA around 130.80 would be a tough hurdle for EUR/JPY sellers to overcome.
Nevertheless, to keep EUR/JPY bulls in charge, they need to reclaim the 50-SMA at 132.10. In that outcome, the following resistance area would be the 100-SMA at 132.25, followed by the top of a bullish fag around the 132.60 area. A breach of the latter would expose the October 20 high at 133.47.
On the flip side, failure at 132.10 would expose a downward break of the bullish flag around the 131.00 region. In that outcome, the first support would be the 200-SMA, followed by October 6 high at 129.49, which was resistance now turned support.
Author
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
