EUR/JPY is still on a steady downtrend as the pair gears up for another forex trade test of the descending trend line resistance on its 4-hour time frame. Price has recently bounced from its recent selloff and may retest the 137.00 major psychological resistance.
Stochastic is still moving towards the overbought zone, indicating that there’s enough buying momentum to lead to a forex trade trend line test. If that holds as resistance, EUR/JPY could head back down to the previous lows near 135.00 or perhaps make new lows near the 134.00 levels.
Take note though that the forex trade selloff seems to be slowing down as the pair is having a tough time making new lows. Should the 135.00 area continue to hold as support, euro bulls could find enough buying momentum to trigger an upside break from the trend line and start a reversal.
EUR/JPY Forex Trade Idea
Bear in mind that the ECB is gearing up for further easing, as their recent monetary policy statement showed that the central bank is ironing out its plans for asset-backed securities purchases later on. This is on top of their latest set of interest rate cuts and their planned targeted long-term refinancing operations starting in September and December.
This could drive the euro lower against most of its forex counterparts, particularly those with central banks looking to tighten. As for the BOJ, the central bank is expressing a bit of concern regarding Japan’s export prospects but hasn’t given any signals of easing further yet.
Risk aversion could also pave the way for more euro forex trade setups, as this could drive more safe-haven flows toward the lower-yielding Japanese yen. Bear in mind that persistent geopolitical risks in Israel and in Russia are weighing on risk appetite and dragging higher-yielding currencies down.
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