Technical Sentiment: Bearish
Key Takeaways
- Investors continue to sell Euro as 15.2B Trade Balance surplus disappoints;
- EUR/JPY broke below the 139 critical support during the European Session;
- The 200-Day Moving Average will be a possible target for next week.
The Euro currency weakened again today as Trade Balance surplus was slightly disappointing at 15.2B, and French employment posted a -0.1% decrease in the first quarter of 2014. Meanwhile the JPY strengthened; forcing EUR/JPY to break the support at 139 and suggesting a 4th consecutive losing day is in the books.
Technical Analysis
EUR/JPY has been extremely bearish since last week when the initial supports at 141 and 140 finally caved in, allowing investors and traders to drive prices lower at a steady pace. Today’s break below 139 signals the market is open for even deeper losses in the coming weeks, even if price will have to retrace at some point to overcome the oversold conditions.
139.10 was the 61.8% Fibonacci Retracement from the February 4th Low of 136.21 up to March 7th High of 143.77. Price breaking below this level suggests we are indeed in a bearish trend rather than just a correction.
The next major support is the 200-Day Moving Average, currently priced at 137.78. With EUR/JPY trading only 100 pips above this level, it’s very likely we’ll see a touch early next week at the latest.
Daily and 4H Stochastic levels are in oversold territory, yet price action has thus far offered no bullish reactions. A bounce from the 200-Day Simple Moving Average is very likely. If the bounce coincides with a huge bullish price action signal, the market will correct this bearish swing all the way up to 140.00 / 141.00. Otherwise, action will be restricted between 137 and 139 until oversold conditions pass.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets
