EURJPY has been trending lower, moving inside a descending channel visible on its 1-hour time frame. Price is bouncing off the channel support and might be due for a test of resistance around the 113.50 minor psychological level.
Applying the Fib tool on the latest swing high and low shows that the 50% level coincides with the channel resistance and is also near the dynamic inflection point at the 100 SMA. This short-term moving average is below the longer-term moving average so the path of least resistance is to the downside.
Stochastic is on its way up but seems to be crossing down, which suggests the presence of weakening bullish pressure. If sellers take over, price could resume its drop to the previous lows near the 112.00 handle or lower until the channel support.
Euro zone flash PMI readings are due today from the manufacturing and services sectors of France and Germany. Small improvements are eyed, with all indices expected to show a slightly faster pace of industry expansion. Weaker than expected results, however, could spur stronger losses for the shared currency.
The ECB refrained from making any monetary policy adjustments last week but this turned out to be a disappointment for bulls who were expecting some confirmation that QE tapering had been discussed. Instead, Draghi suggested that their bond purchase program could even go past the March 2017 end-date.
Earlier today, Japan reported a rise in its flash manufacturing PMI from 50.4 to 51.7, outpacing the consensus at 50.6. Later on in the week, CPI and spending data are lined up from Japan, with another batch of strong readings likely to keep the Japanese currency supported.
By Kate Curtis from Trader’s Way