EURJPY had been trading between support at the 121.70 area and resistance at 123.75. Price seems to be breaking below support at the moment and could be gearing up for a longer-term selloff. Note that the range is approximately 200 pips in height so the resulting selloff could be of the same size.
The 100 SMA is still above the longer-term 200 SMA so the path of least resistance could be to the upside. However, the gap between the moving averages seems to be narrowing so a downward crossover may be imminent. If that happens, bearish pressure could pick up and spur stronger downside momentum.
Stochastic is heading up from the oversold region to suggest a return in buying pressure. This could still allow EURJPY to bounce back to the top of the range or just make a quick pullback to the broken range support.
Economic data from the euro zone has been mostly stronger than expected in the past few days, particularly when it comes to inflation estimates. However, risk aversion is weighing on the shared currency as Brexit headlines are dampening the outlook for the region.
As for the yen, the Japanese currency is taking advantage of the weakness in the dollar, spurred by downbeat December NFP data and the sharp selloff during Trump’s press conference. Japan’s leading indicators showed some signs of improvement and investors are mindful of the BOJ’s upgraded GDP forecasts.
French final CPI and euro zone industrial production numbers are up for release today and upbeat results could allow the shared currency to recover. ECB minutes are also due. On the other hand, downbeat data and more risk-off factors could allow the breakdown to materialize.