Technical Sentiment: Bearish
Key Takeaways
- Euro sentiment takes another hit as economic expectations for Germany decline;
- Bundesbank open to significant ECB stimulus in June;
- EUR/JPY rally ends abruptly near 141;
- Price will break below 140.00, heading towards 139.12 and 138.00 in the near future.
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
