EURJPY is trending lower on its 4-hour chart, moving inside a descending channel connecting the latest highs and lows of price action. The pair is bouncing off support at the moment and may be due for a test of resistance.
The 100 SMA is below the longer-term 200 SMA on this time frame so the path of least resistance is to the downside. In addition, the gap between the moving averages is getting wider, which means that bearish pressure is getting stronger. The 100 SMA is around the mid-channel area of interest, adding to its strength as a ceiling in the event of a shallow pullback, while the 200 SMA dynamic resistance is closer to the channel top at 121.00.
Stochastic is on the move up to indicate that buyers are regaining control of price action from here, but it could be indicative of a return in bearish pressure once it reaches the overbought area and turns down.
Uncertainties all over Europe could keep gains in check for the shared currency, although the latest updates in the French political scene have led to a strong bounce. Headlines revealed that a poll gave the lead to Le Pen’s rival Macron who also gained the backing of influential French politician Bayrou. This could increase their odds of winning the run-off against Le Pen and possibly move the spotlight away from Frexit concerns.
Economic reports from the region haven’t all been bad as the latest batch of flash manufacturing and services PMIs from Germany and France printed stronger than expected results. The German IFO business climate index also beat expectations by rising from 109.9 to 111.0 instead of dipping to 109.6.
Meanwhile, data from Japan has been mixed as the all industries activity index printed a sharper than expected 0.3% decline versus the estimated 0.2% dip while the flash manufacturing PMI printer a higher than expected read of 53.5. Aside from that, the yen seems to be taking advantage of safe-haven flows while traders remain uneasy about buying the dollar.