Eyes on EUR/JPY for a score of 134.40?

Currently, EUR/JPY is trading at 133.08, down -0.25% on the day, having posted a daily high at 133.52 and low at 132.94.

EUR/JPY has tailed off in a relatively strong dollar environment. The euro struggles to take off through the midpoint of the 1.18 handle or get through the 50% retracement of the 1.2092-1.1669 decline at 1.1880, a pip above today's high. 

USD/JPY is technically trapped also. Bears are stacked around the 113 handle and there is a lack of business being done around 112 the figure. Wall Street has continued to print fresh highs, pretty much day in day out, while prospects of a low inflation environment for longer is exciting the corporate sector in respect to lower rates for longer also. EUR/JPY typically correlates to the stock market over the medium term. 

For an outlook for the medium term, it is noted that the stock market is somewhat overbought and possibly in need of a correction. This would tie-in with a daily triple-top scenario at 134.40, if EUR/JPY bulls have the legs between now and such an eventuality on Wall Street?

For now, the dovish tint to the Fed Minutes yesterday and the fading Catalonian concerns underpin a continuation to the upside in the euro and the cross. Eyes are on a breakthrough at 113.40 in USD/JPY, being the 5th October high, for increased volatility to the upside in the major. For the cross, the ECB is also going to be a key driver in respect to whether the Central Bank will begin to reduce QE.

ECB's Draghi: ECB pledge to keep rates low "well past" QE is key - Reuters

EUR/JPY levels

Analysts at Commerzbank explained that while above 131.70, scope remains to retest recent highs at 134.32/58. "A move below the 55-day moving average at 131.10 is needed to alleviate upside pressure and retarget the 129.37 September low and the 127.57 August low," the analysts argued. 

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