EUR/JPY – Further downside to come?

Or is it due a correction?

It’s been a very volatile start to 2022 and risk aversion has certainly picked up in recent weeks following the Russian invasion of Ukraine.

The shift to safe havens has benefited the usual currencies like the dollar, Swiss franc, and Japanese yen, with the latter making significant gains against the euro.

The pair has fallen more than 4% over the last few weeks and despite rebounding a little on Wednesday, looks very vulnerable to a break lower.

And this comes as it is trading around a very important support level, which has proven to be the case multiple times over the last year and was notable prior to that as well.

A break below here could be very significant with 125 being the next major test of support.

As you can see from the 4-hour chart, this would be in keeping with the trend in recent weeks and the momentum indicators don’t suggest that is about to change.

Should divergences form or we see a breakout above the descending channel, we could see a more substantial move to the upside but there’s little to suggest that’s going to happen at the moment.

Of course, this is a very headline-driven market and there’s little to suggest that’s going to change soon.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam