EURJPY has been selling off recently but it seems that a reversal is about to take place. Price formed a double bottom pattern visible on its 1-hour chart, hinting that an uptrend might take place.
Price failed in its last two attempts to break below the 122.00 level and is on its way to test the neckline resistance at 125.00. A break above this level could take price up by an additional 300 pips, which is roughly the same height as the chart pattern.
The 100 SMA is still below the 200 SMA but an upward crossover is brewing, possibly indicating that buyers are about to take over. However, stochastic and RSI are both turning lower from the overbought levels, suggesting that a selloff is due.
Earlier in the week, the euro zone printed weaker than expected CPI estimates, reviving talks of additional ECB easing this month. The headline CPI fell 0.2% instead of staying flat while the core CPI slipped from 1.0% to 0.7%.
Data from Japan has been mixed, with retail sales and household spending printing bleak results and the preliminary industrial production report showing a stronger than expected 3.7% gain.
Risk appetite has favored higher-yielding currencies in the past few days, though, even as data from China has been mostly weaker than expected. Only the Spanish unemployment change report is due from the euro zone today and a 0.2K increase in joblessness is eyed.
By Kate Curtis from Trader’s Way