EURJPY Forex Forecast – Descending Channel Correction

EURJPY is trending lower on its 4-hour time frame, moving inside a descending channel formation. Price is currently testing the resistance around 116.00 and might be due for a selloff back to support at the 111.00 major psychological level.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, price is already trading above both moving averages so an upward crossover could be possible. Price also seems to be finding support at these dynamic inflection points.
Stochastic is on the move up from the oversold region, also suggesting a return in buying pressure. In that case, price could attempt to break past the channel resistance and start a reversal.
European markets closed in the red yesterday even though medium-tier reports from the region came in line with expectations. This was likely due to resurfacing Greek debt concerns raised by ECB member Coeure. Apart from that, widening yield spreads between Germany and the US also spurred euro weakness.
Economic data from Japan has been mixed, with core machinery orders posting a smaller than expected 2.2% drop and preliminary machine tool orders showing a 6.3% slide, following the earlier 8.4% drop. The tertiary industry activity index is up for release today and a 0.2% decline is eyed.
There are no major reports due from the euro zone today, with only the German final CPI reading on the docket. Any headlines on the Brexit, yield spreads, or Greek debt could influence euro price action on a data-light day.
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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.