EUR/JPY Starts Recovery But Facing Many Hurdles

Key Highlights

• EUR/JPY found support near 119.80 and recently started an upside correction.
• There was a break above a bearish trend line with resistance near 120.25 on the 4-hours chart.
• The Euro Zone Services PMI is likely to remain stable at 52.2 in Jan 2020.
• The US ADP Employment could change 156K in Jan 2020, less than the last 202K.

EUR/JPY Technical Analysis

This past month, the Euro declined heavily from well above 122.50 against the Japanese Yen. EUR/JPY even broke the 120.00 support before it found support near the 119.80 area.

Looking at the 4-hours chart, the pair traded as low as 119.77 and settled well below the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours).

Recently, it started an upside correction above the 120.00 and 120.20 resistance levels. Moreover, there was a break above a connecting bearish trend line with resistance near 120.25.

The pair even climbed above the 23.6% Fib retracement level of the last major decline from the 122.87 high to 119.77 low. On the upside, an initial resistance is near the 121.00 level.

However, the main resistance is near the 121.30 level and the 100 simple moving average (red, 4-hours). Besides, the 50% Fib retracement level of the last major decline from the 122.87 high to 119.77 low is also near the 121.30 level.

Therefore, an upside break above the 121.30 resistance won’t be easy. On the downside, the 120.00 and 119.80 levels might continue to provide support in the near term.

Overall, EUR/JPY might correct further higher, but it could struggle to clear 121.30. Besides, both EUR/USD and GBP/USD declined recently and faced an increase in selling pressure.

Upcoming Economic Releases

• Germany’s Services PMI for Jan 2020 – Forecast 54.2, versus 54.2 previous.
• Euro Zone Services PMI for Jan 2020 – Forecast 52.2, versus 52.2 previous.
• UK Services PMI for Jan 2020 – Forecast 52.9, versus 52.9 previous.
• US Services PMI for Jan 2020 – Forecast 53.2, versus 53.2 previous.
• US ADP Employment Change for Jan 2020 – Forecast 156K, versus 202K previous.
• US ISM Non-Manufacturing Index for Jan 2020 – Forecast 55.0, versus 55.0 previous.