Following BoJ’s announcement Yen strengthened and pushed Yen crosses lower across the board. EUR/JPY was no exception, with an initial rally pushing towards support/resistance 120 level before dropping heavily back into the Channel. Attempt to push back higher was stopped just below the Channel Top, with current prices looking to head lower once more.
The recent drop barely touched SMA 200, which was acting as a support back on 16th Jan. Price could still yet find support below 119.0 from SMA 200 before heading lower. Even if SMA 200 is broken, a free falling back to 116.50 will be unlikely with Channel Bottom providing further support and Stochastic readings nearing oversold region already.
Weekly Chart paints a bearish picture showing the significance of 120.0. Price is also looking over-extended on the weekly chart with Stochastic reading nearing 100. Current price below 120 signals a possibility for a move lower with 115.0 providing support, with a break opening up next level around 105. It is also important to note that EUR has been relatively flat between 1.33 – 1.34 against USD – much of the rally in EUR/JPY is due to Yen’s movement. Should directionality picks up again in EUR/USD, we could still see possibility of EUR/JPY climbing back up to 120 and perhaps even 125 and beyond.
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