EUR/JPY had been trading above a rising trend line at the start of June but broke below this support area earlier this month, giving a forex signal that the uptrend is over. Price has pulled up to the broken trend line for a retest and may be due to resume its selloff soon.
Price is finding resistance at the 50% Fibonacci retracement level, which is in line with the trend line and is near the 138.50 minor psychological level. Stochastic is indicating overbought conditions, with a bearish divergence to boot, another forex signal to short. When the oscillator crosses down and starts heading south, price might make its way to test the previous lows near the 137.50 mark as well.
A downside break from the short-term consolidation might be a sign that the selloff will resume while a break below the previous lows could be another forex signal that would indicate that a longer-term downtrend is in the cards.
EUR/JPY Forex Signal Forecast
Earlier this week, the euro zone industrial production report printed weaker than expected results. The actual figure showed a 1.1% decline while the previous month’s reading was downgraded to show a mere 0.7% uptick. Later today, the euro zone and German ZEW economic sentiment reports are up for release and another round of disappointing data might lead to more euro weakness.
ECB Governor Draghi has already expressed the central bank’s desire to keep monetary policy easy for a long while, until the economy is able to bounce back and sustain its recovery. The central bank already cut several interest rates to stimulate lending and spending then they are planning on implementing targeted long-term refinancing operations in September and December to supplement their easing efforts.
As for the yen, the BOJ rate decision could be the main event risk for this week. The Japanese central bank hasn’t expressed an inclination to ease but data from Japan has reflected weakness so the BOJ might change its bias.
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