EURJPY has been moving sideways on its 4-hour time frame, finding resistance around 127.50 and support at the 122.00 major psychological level. Price is currently testing the bottom of the range, still deciding whether to make a bounce or a break.
A bounce could take price back up to the range resistance or the area of interest around 126.50. Meanwhile a break below support could spur a longer-term selloff for the pair.
The 100 SMA is below the 200 SMA so the path of least resistance is to the downside. However, stochastic and RSI are both indicating oversold conditions sellers might take a break and let buyers take over. Keep in mind that the end of the week and month usually spurs profit-taking activity.
Earlier in the week, the BOJ decided to keep monetary policy unchanged instead of adding to its stimulus efforts or lowering deposit rates further. A number of market watchers were also expecting negative lending rates but were disappointed to find out that the Japanese central bank is sitting on its hands.
Data from the euro zone came in mixed. The German preliminary CPI printed a 0.2% decline as expected while the Spanish flash CPI showed a sharper than expected drop of 1.1% versus the projected 0.7% dip. Meanwhile, the German unemployment change report showed a 16K drop in joblessness instead of the estimated 1K rise.
French preliminary GDP and CPI, German retail sales, and the Spanish flash GDP are up for release today. Also due are the euro zone flash CPI estimates, which should provide clues on whether the ECB might need to increase its stimulus program or not. Weaker than expected readings could push EURJPY lower before the end of the week.
By Kate Curtis from Trader’s Way