EUR/JPY: the market failed at 134.58 topside in Nov, deeper to 128.50 now?

EUR/JPY has been recovering back 10 pips in very recent trade in a quiet Thanksgiving holiday market. Currently, EUR/JPY is trading at 131.78, up 0.27% on the day, having posted a daily high at 131.91 and low at 131.23.

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Fundamental releases are providing support tot he euro on the back of the European's session where the preliminary PMI’s for France, Germany, and the euro area were positive. However, EUR/JPY continues to weigh on the downside and continues to look like a potential top pattern. Meanwhile, Minutes of the last ECB meeting showed broad support for taper decision but there was controversy over whether or not QE extension should be open-ended. "All in all, the minutes show that there was broad agreement on the October decision to reduce the monthly QE purchases, starting January 2018. However, further down the road, i.e. beyond September 2018, new disagreements could emerge. In our view, the ECB will do another lower for longer after September 2018. But this discussion is not for now," explained analysts at ING.

EUR/JPY levels

In respect to technicals, "this is the third time in the past 2 months that the market has failed at 134.58 and this is viewed very negatively. Ideally, we would like to see a close below the base of the cloud at 130.98 to confirm losses to 128.50 and the 127.57 August low," explained analysts at Commerzbank.

"Intraday Elliot wave counts are still suggesting scope to retest 134.58. Where are we wrong near term? Above 134.58 November 2015 high. Above here would target the 2008-2017 resistance line at 140.72/141.00. The market is now bid above the 131.39 recent low and the base of the cloud at 130.98," the analysts added.