Technical Sentiment: Bearish
Key Takeaways
An unexpected decrease of 10.1 points in the ZEW Indicator of Economic Sentiment added pressure to the existing EURO negative sentiment and led to a quick sell-off across the board. After bouncing from the 140.00 support area, EUR/JPY is in the midst of another attempt to break below this level. 140.90 is the main pivot acting as resistance and the pair has already formed a Lower High in this area, so a logical continuation will be a Lower Low towards 139.12.
Technical Analysis
The Euro maintains a negative sentiment and there is little that can change in the next two days, which suggests bears will remain in control for now. During the European Session EUR/JPY successfully tested and rejected off of April’s support line at 140.97, also 38.2% Fibonacci retracement from 142.46 down to 139.87, confirming the line as the current resistance.
The current target for today, considering the average daily range of EUR/JPY as of recently, is a test of 140.00 – 139.87. A strong break below 140.00 will trip stop losses and accelerate the sell-off towards 139.13 (61.8% Fibonacci Retracement between 136.21 and 143.77), yet the 200-Day Simple Moving Average (priced at 137.64) will be the main target for such an important support break.
Failure to break below 140.00 is likely to form a short consolidation between 140.00 and 141.00, rather than a consistent bullish reversal. Thus, selling rallies remains the preferred strategy on all timeframes while EUR/JPY price remains below 141.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets