EURJPY has been trading sideways recently, bouncing off support near 132.00 and resistance at 136.25. Price is testing support once more and could be due for another climb to the top or at least until the middle of the range around 133.00.
The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside, which means that support is more likely to hold than to break. However, stochastic is already indicating overbought conditions and is starting to turn lower to signal a pickup in selling pressure. A downside break of support could lead to a drop of around 400 pips or the same height as the chart pattern.
Economic data from the euro zone turned out mostly weaker than expected on Friday as French preliminary private payrolls and Italian industrial production came in short of consensus. Japanese data was also downbeat as the tertiary industry activity index posted a 0.2% decline instead of the estimated 0.1% dip.
Only the preliminary machine tool orders data is due from Japan today and a stronger increase compared to the earlier 45% year-over-year gain could be positive for the yen. Meanwhile, Germany is set to print its wholesale price index and might show a 0.4% increase.
Flash GDP readings from the euro zone nations and the region itself are lined up for the next few days and this should give traders more insight on how the ECB might proceed with its policy changes. Japan also has its preliminary GDP reading due and a 0.4% expansion is expected for Q3.
By Kate Curtis from Trader’s Way