The EUR/JPY pair traded lower during the last week after the fed interest rate decision, and broke an important up-move trend line, as can be seen in the 4 hour chart shown below. The pair is currently flirting with the broken trend line. There is a trend line in the RSI as well, and if the pair breaks that, then it would be a sign of further bearish momentum in the pair. So, I think selling the EUR/JPY pair should be preferred in the short term.
Now, there are two ways to trade the pair during the upcoming week. First, if the pair breaks the RSI trend line and struggles to move up, then we can jump into a sell trade. On the other hand, there are major resistances on the way up for the pair, as highlighted in the chart below. There is also a down-move trend line. If the pair moves to the upside, stops around the resistance levels and creates a bearish divergence, then also we can enter into a sell trade. Remember, the pair should respect the down-move trend line in order for our trade setup to be valid.
Initial target should be around the 139.00 level, and final target could be below the 138.00 level. Stop should be placed above the down-move trend line and resistance area at around the 142.20/30 levels.
Major events scheduled in the upcoming week
The Fed interest rate decision ignited a rally in the US dollar. The fed decided to taper one more time, and kept the interest rates unchanged. The upbeat policy guild lines by the Fed and the chairman Yellen’s speech supported the US dollar. The EUR/USD and GBP/USD pairs suffered the most. The EUR/USD was down more than 150 pips in the previous week, and the GBP/USD traded below the 1.6500 support level. The economic releases in the Euro zone in the past week missed the expectations, which created a bearish pressure on the EUR/USD pair. On the other hand, some pairs like the AUD/USD and NZD/USD also traded lower, but less as compared to EUR/USD and GBP/USD. The USD/JPY pair traded a touch higher during the last week.
Let us look at all major events lined up in the upcoming week.
Sunday – Chinese HSBC manufacturing PMI.
Monday – French Manufacturing and services PMI, German Manufacturing and services PMI, Euro zone Manufacturing and services PMI and US Manufacturing PMI.
Tuesday – German IFO business climate index, UK CPI and PPI data, CB consumer confidence, US new home sales data and Draghi’s speech.
Wednesday – GFK German consumer confidence, US core durable goods data, New Zealand imports, exports and trade balance data.
Thursday – UK retail sales figures, US GDP, initial jobless claims, pending home sales and Tokyo’s CPI data.
Friday – French consumer spending, French GDP, UK GDP, Euro zone consumer confidence, US personal spending data and Michigan consumer sentiment.
This analysis is taken from Weekly Market Forecast, which also includes trade opportunities on: EUR/USD, GBP/USD, EUR/GBP, EUR/CHF, USD/JPY, NZD/USD, AUD/NZD, EUR/AUD and USD/CAD .