EUR/JPY Price Analysis: Plummets 200 pips, head-and-shoulders pattern remains in play

 The EUR/JPY is plunging more than 1.50% on Wednesday, reversing Tuesday’s gains as EUR/JPY bears regained control and pushes the exchange rate below the head-and-shoulders neckline, keeping the pattern in play. At the time of writing, the EUR/JPY is trading at 134.11.

The market sentiment remains negative, carrying on from the European to the whole New York session. Also, EU economic data, particularly inflation figures, rose below than expected and in line with previous readings, easing the prospects of a hawkish European Central Bank (ECB).

In the overnight session, the EUR/JPY opened at around 136.50s and reached a daily high at 136.67 before tumbling 220-pips, breaking below the 50, 100, and 200-hour simple moving averages (SMAs), as sentiment turned sour

EUR/JPY Price Forecast: Technical outlook

On Tuesday, the EUR/JPY bias shifted upwards when the cross-currency pair rallied more than 200-pips. Nevertheless, Wednesday was revenge day for EUR/JPY bears, which caused a drop of more than 220-pips during the day and kept the head-and-shoulders chart pattern in play, which was threatened by Tuesday’s price action.

Albeit the bears are in control, they are not out of the woods yet. A break below 132.65 is needed to increase the possibility of reaching the head-and-shoulders chart pattern target at 130.00.

That said, the EUR/JPY first support would be 134.00. Break below would expose the May 16 daily low at 133.74, followed by May 13 swing low at 133.09 and then the 100-day moving average (DMA) at 132.25, before exposing the 200-DMA at 131.10.

Key Technical Levels