Thanks to the dovish ECB interest rate statement, EUR/JPY finally picked a direction after months of consolidating inside a symmetrical triangle forex trading chart pattern on the 4-hour time frame.
The pair made a sharp break below the triangle support, indicating that the pair is in for more losses. However, stochastic on the same time frame is already in the oversold zone, which means that bears are already exhausted. With that, EUR/JPY might make a forex trading retracement to the broken support area before heading any lower.
EUR/JPY Forex Trading Forecast
ECB Governor Mario Draghi has mentioned that the central bank might be ready to ease in June, depending on how inflation forecasts turn out. Remember that deflation is becoming a concern in the region as the euro keeps appreciation. Further gains in the currency might wind up hurting trade activity and putting excess downward price pressures.
With that, EUR/JPY might be in for more losses as traders position for negative deposit rates or more asset purchases from the ECB next month. Take note that the symmetrical triangle chart pattern is roughly 800 pips in height, which means that the resulting selloff could be of the same size.
As for the BOJ, central bank officials have repeatedly emphasized that the Japanese economy is resilient and that the recently implemented sales tax hike probably won’t hurt economic performance so much. Despite that, they have also expressed openness for implementing a corporate tax cut to offset the potential drag of the sales tax increase.
Risk sentiment is favoring further forex trading losses for the pair in the meantime, as the tension in Russia and Ukraine escalated over the weekend. France and Germany have reiterated their plans to impose further sanctions if the presidential election in Ukraine doesn’t go as planned this month.
To contact the reporter of the story: Marco Roemer at email@example.com