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EUR/JPY Trading Near Make-or-Break Levels

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Aayush Jindal

Key Highlights

  • The Euro started a decent recovery from the120.78 low against the Japanese Yen.
  • EUR/JPY recovered above 121.50 and a bearishtrend line on the 4-hours chart.
  • The Euro Zone Services PMI increased from 52.8to 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.

EURJPY Technical Analysis Euro Japanese Yen

Looking at the 4-hours chart, the pair traded above the23.6% Fib retracement level of the downward move from the 123.74 high to 120.78swing low. Moreover, there was a break above a key bearish trend line withresistance at 121.60.

The pair even broke the 122.00 resistance and tested thenext key resistance near the 122.25 level. The 50% Fib retracement level of thedownward move from the 123.74 high to 120.78 swing low acted as a strongresistance.

On the upside, there are many important resistances near122.40 and the 100 simple moving average (red, 4-hours). If there is an upsidebreak above 122.40, the pair could start a strong recovery towards 123.00 or123.50.

Conversely, if the pair fails to move above the 100 SMA, itcould start a fresh decline below the 121.50 and 121.40 support levels. Themain support is at 120.80, below which the pair could decline to 120.00.

Fundamentally, the Euro Zone Services Purchasing ManagersIndex (PMI) for May 2019 was released by theMarkit Economics. The marketwas looking for no change from the last reading of 52.5.

However, the actual result was above the market forecastsince there was an increase in the services PMI to 52.9. Moreover, the lastreading 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 122.40resistance area to continue. If not, there is a risk of more downsides below121.00.

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%, versus0% previous.
  • US Initial Jobless Claims - 215K Forecast, 215Kprevious.
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