- The euro advanced 200-pips on Tuesday and recorded a fresh weekly high at around 136.69.
- ECB’s Knot expressed that a 25-bps rate hike is realistic, but he would not exclude a 50-bps.
- EUR/JPY Price Forecast: The bias shifted upwards, but a daily close below 136.00 or under the neckline would keep the head-and-shoulders pattern intact.
The common currency is rallying during the day, and it remains the gainer in the FX complex on Tuesday, to the detriment of safe-haven peers, which are getting battered by most of the G7 currencies, as market sentiment improved. At the time of writing, the EUR/JPY is trading at 136.24, above the head-and-shoulders neckline, threatening to invalidate the pattern.
The market mood in the New York session remains positive, carrying on the mood from the Asian and European sessions. US equities are recording gains between 1% and 2.67%. China’s improvement on its Covid-19 crisis, particularly in Shanghai, recording three consecutive days without cases, was cheered by investors to the detriment of the greenback and the Japanese yen.
In the overnight session, the EUR/JPY opened around 134.50 and rallied on ECB Klaus Knot’s comments, saying that a 25bp hike in July is realistic while adding that a 50bp rate hike should not be excluded if data in the next few months suggests that inflation is broadening and accumulating.
Following those remarks, the EUR/JPY rallied more than 200-pips, putting in danger the validity of the head-and-shoulders pattern, with the cross-currency exchange rate being above the neckline, which lies around the 135.25-35 range.
EUR/JPY Price Forecast: Technical outlook
On Tuesday, the EUR/JPY surged above the 50-day moving average and the head-and-shoulders neckline in the 134.95-135.25/35 area, threatening to invalidate the chart pattern. In the near term, the bias, which shifted to neutral-upwards, as of writing is upwards.
With that said, the EUR/JPY’s first resistance would be 137.00. Break above would expose 138.00, followed by May 9 swing high at 138.32. On the flip side, the EUR/JPY first support would be 136.00. A breach of the latter, the next 
support would be the head-and-shoulders neckline around 135.25-35, followed by April’s 27 daily low at 134.77.
Key Technical Levels
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