Key Highlights
- The Euro after a solid upside move formed a high at 136.63 against the Japanese Yen.
- The EUR/JPY pair moved down sharply and broke a crucial bullish trend line with support at 135.25 on the 4-hours chart.
- The pair must stay above 134.40 to avoid any further declines in the near term.
- Today’s German Trade Balance report for Nov 2017 could have a positive impact on EUR/JPY.
EURJPY Technical Analysis
The Euro opened 2018 with a positive bias not only against the US Dollar, but also versus the Japanese Yen. The EUR/JPY pair traded above 136.00 and is currently correcting lower.
Looking at the 4-hours chart, it seems like there was a major rejection from the 136.63 high. The pair has moved below the 50% Fib retracement level of the last wave from the 133.90 low to 136.63 high.
The downside was strong since there was a break below a crucial bullish trend line with support at 135.25 on the same chart. It ignited further declines below the 61.8% Fib retracement level of the last wave from the 133.90 low to 136.63 high.
Below the trend line support, the 134.30-134.40 area is the next major support. EUR/JPY must stay above 134.40 with no 4-hour close to avoid any trend change. Should there be a close below 134.40, the pair could move back towards 133.25.
On the upside, an initial hurdle for a recovery is at 135.25. Above 135.25, the pair will most likely drift towards the 136.00 handle.
Fundamentally, the Euro Zone recently saw the release of the Economic Confidence indicator for Dec 2017 by the European Commission. The result was better than the forecast of 114.8, as there was a rise in the Economic Confidence indicator from 114.6 to 116.00.
However, the result failed to lift the market sentiment for the Euro. It traded lower versus the US Dollar as well. Both EUR/USD and EUR/JPY declined strongly and are heading towards key support levels. Thus, the next few sessions could be crucial. An increase in the current selling pressure may push both pairs further into the bearish zone.
