The EUR/JPY is in a correction phase, has reached an important support level and remains to see if the price will resume the downward movement or will rebound in the coming period. The pair has decreased sharply in the last week as the Japanese Yen has dominated the currency markets, has increased versus all its counterparts. The Bank of Japan Governor has announced new stimulus measures if needs, he said that the BOJ will do anything to reach the 2% inflation target, personally I don’t think that the current QQE could boost the inflation.
The EUR/JPY is trading right above the 50% retracement level and above the median line of the descending pitchfork, the price has failed to close right on the median line (ml), this could be an exhaustion signal, the pair is struggling to rebound today as the Nikkei stock index has found a very strong support level and now is increasing on the short term. The currency pair is moving down inside of a down channel, is trapped between the upper median line (uml) and the median line (ml) of the descending pitchfork, the price could bounce back from the confluence area formed at the intersection of the median line (ml) with the 50% retracement level. The price will resume the downward movement only if will take out the support from the 50% retracement level, if this scenario will happen, then the next downside target will be at the 61.8% retracement level, the price could decline further as long as is trading inside of the descending pitchfork’s body.
The Yen wasn’t impressed by the Japanese economic data as the Bank Lending rose by 2.0% in March, lower compared to the 2.2% growth in February. Moreover the Prelim Machine Tool Orders have increased from -22.5% to -21.2% in March. The Euro jumped higher in this morning as the German economic figures have come in line with expectations, the Final CPI surged by 0.8%, the growth remains steady for the second month in March, while the German WPI has increased by 0.3%, matching expectations.
You can notice on the Daily chart that the price has failed to retest the median line (ML) and now is fighting hard to increase after the last week massive drop. The EUR/JPY has also failed to reach the previous low from 122.06, signalling that the bears are exhausted on the short term, the pair remains under selling pressure on the medium term as long as the price will stay below the upper median line (UML) and below the 38.2% retracement level. We could have a short throwback and the price will try to retest the 50% Fibonacci line (descending dotted line).
I’ve drawn a short term descending pitchfork on the H4 chart, the price has jumped again above the lower median line (lml), but we have to wait for the lower median line retest to be sure that the price will increase in the coming hours, the target is at the median line (ml).