Key Highlights
- The Euro started a decent recovery from the 120.78 low against the Japanese Yen.
- EUR/JPY recovered above 121.50 and a bearish trend line on the 4-hours chart.
- The Euro Zone Services PMI increased from 52.8 to 52.9 in May 2019.
- The Euro Zone GDP could grow 0.4% in Q1 2019 (QoQ), similar to the last reading.
EURJPY Technical Analysis
After a sharp decline, the Euro found support near 120.80 against the Japanese Yen. The EUR/JPY pair started an upside correction and traded above the 121.50 resistance area.
Looking at the 4-hours chart, the pair traded above the 23.6% Fib retracement level of the downward move from the 123.74 high to 120.78 swing low. Moreover, there was a break above a key bearish trend line with resistance at 121.60.
The pair even broke the 122.00 resistance and tested the next key resistance near the 122.25 level. The 50% Fib retracement level of the downward move from the 123.74 high to 120.78 swing low acted as a strong resistance.
On the upside, there are many important resistances near 122.40 and the 100 simple moving average (red, 4-hours). If there is an upside break above 122.40, the pair could start a strong recovery towards 123.00 or 123.50.
Conversely, if the pair fails to move above the 100 SMA, it could start a fresh decline below the 121.50 and 121.40 support levels. The main support is at 120.80, below which the pair could decline to 120.00.
Fundamentally, the Euro Zone Services Purchasing Managers Index (PMI) for May 2019 was released by the Markit Economics. The market was looking for no change from the last reading of 52.5.
However, the actual result was above the market forecast since there was an increase in the services PMI to 52.9. Moreover, the last reading was revised up from 52.5 to 52.8.
The report stated that:
Modest growth of the private sector economy occurred at a time when levels of incoming new business were rising only slightly for the third month running.
Overall, EUR/JPY needs to recover above the 122.40 resistance area to continue. If not, there is a risk of more downsides below 121.00.
Economic Releases to Watch Today
- Euro Zone Gross Domestic Product Q1 2019 (QoQ) – Forecast 0.4%, versus 0.4% previous.
- Euro Zone Gross Domestic Product Q1 2019 (YoY) – Forecast 1.2%, versus 1.2% previous.
- ECB Interest Rate Decision – Forecast 0%, versus 0% previous.
- US Initial Jobless Claims – 215K Forecast, 215K previous
