EURJPY is finding resistance at its current levels and indicating a pickup in selling pressure, which could be the start of either a major retracement or a forex trend reversal.
A selloff from the current 139.00 levels could signal the start of a retracement. Applying the Fibonacci tool on the latest swing high and low of the 4-hour chart shows that the 138.00 major psychological level lines up with the 38.2% Fib, which is also close to the 100 simple moving average.
Meanwhile, the 50% Fibonacci retracement level also lines up with the 200 simple moving average and the 137.50 minor psychological level, which could also hold as support if the forex trend correction is deeper. The line in the sand for a market correction is the 137.00 major psychological level, which is close to the 61.8% Fibonacci retracement level.
EURJPY Forex Trend Reversal
For now, stochastic is reflecting a strong run in selling momentum, which still leaves the possibility of a forex trend reversal. A break below the 137.00 handle could confirm this and probably take EURJPY all the way down to the swing low near the 136.00 major psychological support.
Meanwhile, MACD is cruising sideways but is still indicating a bit of selling pressure, which suggests that price might have difficulty breaking past the 139.00 area without a market correction taking place first.
Any potential moves could take place mid-week, as the Fed will announce its monetary policy statement. Hints that the US central bank could start tightening next year might lead to yen weakness, as traders move their lower-yielding positions to the dollar, which might then push EURJPY higher.
There are no major events lined up from both the euro zone and Japan this week, although both pairs are fundamentally weak and economic data seem to confirm so. When it comes to policy though, the euro zone is already under negative deposit rates, which supports the possibility of a forex trend reversal.
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