EURJPY recently broke to the upside of its descending channel visible on its 4-hour time frame. Price rallied close to the 135.00 handle before making a pullback and using the Fib tool shows the nearby support levels.
In particular, the 38.2% Fib is closest to the broken channel resistance that might now hold as support around 134.00. A bounce off this level could take EURJPY back up to the swing high and beyond.
The 100 SMA is above the longer-term 200 SMA to signal that the path of least resistance is to the upside. This means that the rally is more likely to continue than to reverse. However, stochastic is just turning down from overbought levels to show a pickup in selling pressure.
The BOJ kept interest rates on hold as expected in their latest policy statement. Traders seemed disappointed that Governor Kuroda didn’t follow through on its previous remarks on “reversal rate” or the point at which aggressive stimulus might be doing more harm than good.
Meanwhile, the euro got an earlier boost on reports that Germany will be issuing more bonds next year. This drove prices down and yields up across the euro zone, allowing the shared currency to benefit.
German GfK consumer climate and French consumer spending figures are due next, and strong results could reinforce hawkish ECB expectations. There are no major reports due from Japan but the yen appears to be getting weighed down by bond yields and the dollar’s rallies.
By Kate Curtis from Trader’s Way