In our EURJPY forecast we see a rebounded after the pair again reached the 131.27 level. Currently, it is pressuring a confluence area, and it remains to be seen if it makes an upside breakout or makes a turn to the downside.
The pair rallied after the Japanese Preliminary Industrial Production dropped by 5.9% versus 2.1% expected, representing a significant undershooting of where the economy had been expected to be. The underperformance of the Japanese economy compared to its advanced economy peers continues to be a concern for buyers of the yen.
The JP225 (Nikkei) rose in the last hours of the equities session, leading the yen to depreciate versus its rivals, reflecting the export-led characteristics of the economy.
In a more encouraging sign that the worst may be in the rear-view mirror, Japanese Consumer Confidence increased from 34.1 to 37.4, beating the 34.8 estimates, while the Housing Starts registered a 9.9% growth, exceeding the 8.4% forecast.
Meanwhile, forex traders will have noted that the eurozone CPI Flash Estimate and the Core CPI Flash Estimate have landed in line with expectations.
EURJPY Forecast – technical analysis
Today’s EURJPY forecast shows the pair is pressuring the weekly pivot point (131.64) and the lower median line (LML). In fact, we have a confluence area at the intersection between these two obstacles. A valid breakout through this confluence area indicates a strong rally.
Registering a false breakout and a rejection in this zone could signal the pair is on another downward trip. Nikkei’s further growth could bring a potential rise in EUR/JPY as well. EUR/JPY has found strong support on the second warning line (WL2) of the descending pitchfork.
The current decline was to be expected after reaching the median line (ML) and after the previous stellar rally. Technically, pushing above the immediate resistance levels and stabilizing could bring a new burst of momentum with a move towards the median line (ML).
The upside scenario will be invalidated by a potential drop below 131.27, the former low, and under the 505 retracement level.
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