EUR/JPY has been topping since the beginning of Feb while USD/JPY has been pushing higher highs since. Recent recovery early March has also failed to test the previous swing high around 128.0 and is a strong signal that bears are plaguing EUR. The concern of EUR is still the same – unresolved financial issues surrounding Greece, Italy and Spain. Recently, Cyprus has entered the spotlight and the latest bailout package is certainly less than satisfactory for the market, sending EUR lower. This bailout sets a new precedence, coupled with political uncertainty which was Italy and now to be Germany, Euro-Zone is risking undoing all the positive goodwill they’ve gained the past 2 years in 2013.
Today’s sell off breaks the rising trendline and send price deep into the rising Kumo. Stochastic readings are also sharply lower, suggesting a bear cycle is underway, in-line with the descending trendline acting as a strong resistance. Ichimoku has also turned bearish (forward Kumo not shown on chart), adding another tick on the list of bearish indicators. Senkou Span B may provide support, though a breakout will open up 118.0 as interim support with the entire uptrend at risk if 118.0 is broken. Price may still find interim supports in the form of past consolidation along the way, but the speed of the ascension since November may actually result in an equal or perhaps even faster decline as bears come back with a vengeance.
Hourly Chart demonstrates the huge impact on EUR/JPY the Cypriot bailout has on this currency pair. EUR/JPY was hit hardest (falling 1.6% while EUR/USD gapped 0.62% lower) due to the double whammy of Yen strengthening from Safe Haven flows. However, do not be mistaken, price was already on the backfoot closing below the current Kumo and threatening to break the rising trendline, and we were already primed to see bearish acceleration with or without Cyprus Bailout. Nonetheless, EOD technical traders who took the signal will be very happy that their short position kept over the weekend would have gained so much in so little time.
Price has seen some slight recovery which is to be expected. However we are far away from any form of support/resistance (the nearest being Kijuu-Sen which is more than 50 pips away). Bears are firmly at play though a retest of the 124.0 support may still be in the cards. Alternatively, a fall below 122.0 and preferably sub 121.5 may accelerate further bearish momentum. Keep a keen watch tonight as Cypriot Parliament will vote on the Bailout package, it will be interesting to see how the market may react – a rejection vote here may actually be beneficial for EUR with market deeply unsatisfied with the bailout outcome. This may mean that Cyprus will not have funds from IMF and Euro-group, but with Russia rumored to have offered alternative funding options, it seems that the bailout fiasco may drag beyond today.
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