EURJPY Downtrend Correction (June 17, 2016)

EURJPY has been trending lower on its 1-hour time frame, moving under a descending trend line connecting the latest highs of price action. Price appears to have found a bottom and is starting to make a pullback to the falling resistance area.

Drawing the Fib tool on the latest swing high and low shows that the 61.8% Fib is close to the trend line and a former support area, which might hold as resistance. The trend line is also near the 100 SMA which usually holds as a dynamic resistance level. 

Speaking of moving averages, the 100 SMA is below the 200 SMA so the path of least resistance is to the downside. Stochastic is already indicating overbought conditions while RSI is in the overbought region as well, suggesting that bueyrs are feeling exhausted and may let sellers take over from here. If so, EURJPY could return to its previous lows near 115.00 or make new ones.

Rumors of FX intervention in Japan are swirling once again, leading traders to dump their long yen holdings. As government officials have mentioned, they would be ready to step in if the yen appreciates too sharply but so far no actual evidence of intervention has been revealed.

As for the euro, data came in line with expectations yesterday, as there were no revisions to the region’s final CPI readings. Italy’s trade balance and the euro zone current account balance are up for release today, although this might not have much of an impact on the shared currency’s direction.

Brexit updates could continue to drive euro price action into the weekend, as the attack on MP Jo Cox yesterday prompted rumors that the EU referendum might be postponed. PM Cameron has suspended campaigning for today, leaving market watchers to speculate on the potential impact of this incident on the Brexit vote.

By Kate Curtis from Trader’s Way