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EURJPY Correction Setup (June 14, 2016)

Daily Forex Reports | by Kate Curtis | Tuesday, 14 June 2016 05:13 UTC

EURJPY recently made a strong break below support around the 121.50 minor psychological level then dipped close to 119.00. Price seems to be making a pullback from here, offering an opportunity to for sellers to catch the drop at higher levels.

Using the Fib tool on the latest swing high and low shows that the 50% to 61.8% levels are close to the falling trend line connecting the latest highs of price action on the 4-hour time frame. In particular, the 61.8% level lines up with a former support zone which might now hold as resistance.

The 100 SMA is below the 200 SMA, which means that the path of least resistance is to the downside. In addition, the 100 SMA lines up with the falling trend line, adding to its strength as a resistance level. However, stochastic is on the move up, signaling that buyers are regaining control while RSI is also heading higher.

There are no major reports due from the euro zone this week, leaving the euro sensitive to market sentiment. So far, Brexit polls are also influencing the shared currency's movement, with results showing a lead in favor of a Brexit also dragging the euro down. The latest batch of surveys from ICM and YouGov have been showing a widening lead in favor of those voting to exit the EU, adding to potential uncertainty in the region.

As for the yen, the main event risk would be the BOJ decision, even though no actual monetary policy changes are expected. Still, monetary policy authorities might decide to talk the currency down, especially since the yen has been strongly rallying on risk-off flows these days.

By Kate Curtis from Trader's Way

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