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ECB to Make-or-Break EURJPY – Watch This Range

ECB to Make-or-Break EURJPY – Watch This Range

Michael Boutros, Strategist

Talking Points

EUR/JPY Daily

EUR/JPY Daily Chart

Technical Outlook:EURJPY reversed off slope resistance last month with the pullback now testing key confluence support into the 2017 open at 123.17. Today’s close will be paramount with the immediate downside bias at risk if we close above this threshold. A break below today’s lows suggests a larger correction is underway with such a scenario risking a decline toward the 50-line at 120.33. That said, the near-term picture suggests some caution is warranted here and heading into major event risk tomorrow the focus is on a well-defined range just above last month’s low at 122.56.

EUR/JPY 120min

EUR/JPY 120min Chart

Notes: A closer look at price action highlights today’s reversal off confluence support at 122.67 where the 100% extension of the late-May decline converges on a pair of medina-lines. Note that RSI has also marked divergence into this low warns of possible near-term exhaustion.

Bottom line: the focus range heading into tomorrow’s highly anticipated European Central Bank (ECB) interest rate decision is 122.67 - 123.65 with a breach above 124.29/52 needed to shift the broader focus back to the long-side (bearish invalidation). A break below this level keeps the short-bias in play targeting the median-line (blue) backed by 121.98 & 121.64.

ECB to Make-or-Break EURJPY – Watch This Range
  • A summary of IG Client Sentimentshows traders are net-short EUR/JPY- the ratio stands at -2.13 (31.9% of traders are long)- bullish reading
  • Retail has been net-short since April 25th – price has rallied 5.5% higher since
  • Long positions are 7.0% lower than yesterday and 7.4% lower from last week
  • Short positions are 7.9% lower than yesterday and 17.2% lower from last week
  • While broader sentiment continues to point higher for EUR/JPY, traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EURJPY price trend may soon reverse lower despite the fact traders remain net-short. That said, from at trading standpoint, I’ll be looking for a break of the aforementioned range for further guidance on our near-term directional bias.

See how shifts in EUR/JPY retail positioning are effecting market trends- Click here to learn more about IG Client Sentiment indicators!

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Relevant Data Releases

ECB to Make-or-Break EURJPY – Watch This Range

Other Setups in Play:

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex contact him at mboutros@dailyfx.com or Click Here to be added to his email distribution list.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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