EURJPY Ascending Channel (Feb 06, 2018)

EURJPY suffered a steep drop recently but is currently pausing at the bottom of its ascending channel on the 4-hour time frame. A bounce off this region could take price up to the resistance at 137.25-137.50.

The 100 SMA is above the longer-term 200 SMA to confirm that the path of least resistance is to the upside. In other words, the uptrend is more likely to continue than to reverse. However, price has already moved below the moving averages’ dynamic inflection points.

Stochastic is also moving down to show that sellers are in control, but the oscillator is dipping into oversold territory to signal exhaustion among bears. If buyers take over, support around 134.50 could keep losses in check.

The yen was the strongest performing currency in latest trading session as risk-off flows picked up and higher-yielding assets too hits. Concerns about inflation and global tightening were being pinpointed as the cause of the drop while others say that it was just a much-needed pullback.

The euro has managed to stay resilient against most of its other peers though, especially since Draghi acknowledged that economic growth has been broad-based in the region and that they are more confident about inflation. Still, he cautioned that it’s too early to call victory just yet.

Only a few medium-tier reports are due from the euro zone next but strong data could continue to keep the shared currency afloat on expectations of ECB tightening. Meanwhile, the yen could take its cue from market sentiment.

By Kate Curtis from Trader’s Way