Today we have an interesting sell opportunity for the EUR/JPY as I think the pair is heading towards the critical psychological resistance at around the 140.00 level. There is a bearish divergence on the weekly chart as well, which adds value to our bearish view in the short to medium term.
Looking at the 4 hour chart of the EUR/JPY, there is an up-move trend line as can be seen below. There is also a support at around the 139.20 level. If the pair moves lower, breaks the trend line and the most relevant support and closes below it, then we will jump into a sell trade. Remember, if the pair moves higher, then the trend line and support combination will also move higher. Once the double break solidifies, after that we will enter a sell trade.
EUR/JPY Hourly Chart" title="EUR/JPY Hourly Chart" height="680" width="1356">
Initial target should be around the 138.20 level, and final target could be around the next up-move trend line as plotted on the 4 hour chart shown below. Stop should be placed above the broken trend line and support level.
EUR/JPY Hourly Chart" title="EUR/JPY Hourly Chart" height="680" width="1356">
Reviewing yesterday’s events and trades
Yesterday in the European session, the manufacturing PMI’s were released for the Spain, France, Italy, Germany and Euro zone. The outcome was better than expected for all the regions except for the Spain, which registered a decline from 50.9 to 48.6. The EUR/USD fell more than 50 pips after the release. Later in the NY session, US ISM manufacturing PMI data was released, which jumped from 56.4 to 57.3, beating the expectations of 55.0. The US dollar traded higher, and gained ground after the release. The EUR/USD traded as low as 1.3525, and GBP moved towards the 1.6340 level.
Fundamental Outlook for the day
Earlier in the Asian session, the RBA interest rate decision was scheduled. The central bank kept the interest rates unchanged at 2.5%. The Australian dollar traded a touch lower after the release. Today, there is no market moving event scheduled for the US. Some of the low-risk events lined up include, ISM – NY Business Conditions data and the Investor’s Business Daily (IBD), TechnoMetrica Institute of Policy and Politics (TIPP) Economic Optimism Index, which is expected to rise from 41.4 to 43.2.