Key Highlights
- The Euro failed to move above 133.80 recently and corrected lower against the Japanese Yen.
- EUR/JPY is approaching a major break as there is a contracting triangle forming with support at 132.60 on the 4-hours chart.
- The US Core CPI in Nov 2017 posted an increase of 1.7%, less than the forecast of 1.8% (YoY).
- The feds raised interest rates from 1.25% to 1.50% with stable outlook for 2018.
EURJPY Technical Analysis
There was a decent recovery in the Euro above 133.50 recently against the Japanese Yen. However, the EUR/JPY pair faced a strong sell zone and is currently correcting lower.
Looking at the 4-hours chart, there are a few important points to note. First, there is a crucial contracting triangle forming with support at 132.60. Second, the triangle support at 132.60 is around both key SMA’s – 100 (red) and 200 (green). Last, the triangle resistance played a major role recently and prevented gains above 134.00.
Recently, the pair traded below the 50% Fib retracement level of the last wave from the 132.25 low to 133.88 high. The triangle support around 132.60-80 which is around the 61.8% Fib level of the same wave protected further losses.
The 132.60 support zone holds a lot of significance. EUR/JPY has to stay above 132.60 and the 100 SMA (red, 4-hour) to avoid any further declines.
On the flip side, a break above the 133.80 level can ignite more gains above 134.00. The next target could be around 134.50 and 135.00.
Market Recap – US CPI and Fed Interest Rate Decision
Recently, the US market saw two important releases – CPI for Nov 2017 and the Fed interest rate decision. The US Core CPI was forecasted to post an increase of 1.8% (YoY), but it increased by 1.7%.
In terms of the monthly change, there was a rise of 0.1% in the Core CPI, which was less than the forecast of +0.2%. The report mentioned that:
The energy index rose 3.9 percent and accounted for about three-fourths of the all items increase. The gasoline index increased 7.3 percent, and the other energy component indexes also rose. The food index was unchanged in November, with the index for food at home declining slightly.
More importantly, the feds raised interest rates from 1.25% to 1.50% for the third time in 2017. The outlook for 2018 was unchanged by the central bank.
The impact was bearish on the US Dollar as the risk sentiment was boosted. USD/JPY moved down below 113.00, GBP/USD jumped above 1.3400 and EUR/USD traded above the 1.1820 resistance.
