EURJPY is still moving in an uptrend but is currently bouncing off the top of its ascending channel resistance on the 4-hour time frame. Stochastic is also turning lower from the overbought zone to indicate a pickup in selling pressure.
If this keeps up, price could drop to the channel support at the 130.50 minor psychological level. This lines up with the moving averages dynamic inflection points. However, the 100 SMA is above the longer-term 200 SMA to signal that the path of least resistance is still to the upside.
Euro bulls could wait for an actual test of the channel support before going long and aiming for the channel resistance at the 132.50 minor psychological level or higher.
Data from the euro zone has been mostly stronger than expected so far this week. The German final CPI reading was unchanged at 0.1% as expected but the WPI was stronger than expected at 0.3% versus the projected 0.1% gain. The region’s employment change figure for Q2 was also better than expected at 0.4% versus 0.3% while the previous period’s reading enjoyed an upgrade.
As for the yen, data has also been upbeat as the BSI manufacturing index recovered from -2.9 to +9.4, much higher than the projected +4.8 reading. Annual PPI came in a notch lower than the projected 3.0% figure at 2.9% but still marked a decent improvement over the earlier 2.6% figure.
There are no major reports due from both the euro zone and Japan today, so price action could hinge mostly on market sentiment. Also note that the yen has sold off on dollar strength as expectations for an upbeat CPI release kicked in when the PPI beat consensus.
By Kate Curtis from Trader’s Way