Chart of The Day EURJPY
EURJPY Probable Price Path & Potential Reversal Zone
EUR: Upbeat Eurozone data offered some reliefs: Final reading of 3Q GDP confirmed that the Eurozone economy expanded 12.5% QOQ and contracted 4.3% YOY (prelim +12.6% QOQ and -4.4% YOY), rebounding nicely from 2Q’s 11.8% QOQ and 14.8% YOY decline, thanks to broad-based rebound in consumption and investment . Adding on to the positivity was ZEW surveys that jumped higher to 54.4 in December (Nov: 32.8) spurred by vaccine hopes, and a slightly quicker than initially estimated turnaround in employment (+1.0% vs 2Q: -3.0%).
Factors supporting: Economic data rebound - Factors against: Risk aversion, Covid-19 outbreak
JPY: Jump in Japan core machinery orders may be just a blip: Core machine orders bounced back more than expected to increase 17.1% MOM in October (Sept: -4.4% MOM), its best gain in 24 years. This was led by a marked pick-up in the manufacturing sector while the nonmanufacturing sector saw weaker growth. This may be just a blip and may not translate into a spike in capital spending given the weak outlook domestically and abroad.
Factors supporting: BOJ policy, risk aversion - Factors against: Weak fundamentals
From a technical and trading perspective, EURJPY is currently carving out a wave 4 consolidation pattern, this pattern is developing in a complex manner which should see price test 125.80/70 before extending higher in a terminal wave 5 to test offers and stops above 127, expect profit taking to emerge here a price makes a third test of projected ascending trend channel resistance, from this area we could witness a wash out of weak hands and see a retest of projected ascending trendline support to 124.50. From a positioning/options perspective it is noteworthy that current levels, from a historical perspective, have marked decent inflection points for EURJPY corrective moves lower.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!