EURJPY could be in for a reversal from its selloff, as the pair formed an inverse head and shoulders pattern on its 1-hour time frame. Price already broke past the neckline at the 114.00 major psychological mark and might climb by around 150 pips, which is the same height as the chart formation.
The 100 SMA is still below the longer-term 200 SMA, though, so the path of least resistance is to the downside. An upward crossover, however, could draw more buyers to the mix and allow the climb to gain traction. Note that price is already trading above these moving averages, which might hold as dynamic support levels moving forward.
Stochastic is pointing down to show that sellers are in control of price action for now. Once the oscillator reaches the oversold region and turns higher, buying pressure could return.
Sources have shared that the ECB is mulling some adjustments to their QE program, which is likely to extend past the March 2017 end-date. This could include lightening restrictions on the availability and size of purchases, making it easier to boost liquidity in the region.
Data from the euro zone hasn’t been so bad so far this week, as most of the manufacturing and services PMI from Germany and France came in better than expected. German IFO business climate was also better than expected but the GfK consumer climate index fell short of estimates.
There are no reports due from the euro zone and Japan today, as the top-tier reports are all lined up on Friday. From Japan, we’ve got consumer spending and CPI readings which could set the tone for the BOJ statement next week. Euro zone has its preliminary GDP and CPI reports from Germany, France, and Spain.
By Kate Curtis from Trader’s Way