EUR/JPY looks set to extend a weeks-long downtrend!
Will the pair break a key support zone in the next trading sessions?
Before moving on, ICYMI, I’ve listed the potential economic catalysts that you need to watch out for this week. Check them out before you place your first trades today!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
Brent crude oil prices opened the week near two-month highs at $84 as a Houthi attack on a fuel tanker in the Red Sea upped supply concerns
New Zealand’s trade deficit tightened from 1,250M NZD to 323M NZD as imports (-13% y/y) fell faster than exports (-8.7% y/y)
Spot gold prices traded above $2,030 on escalating Middle East tensions and uncertainty ahead of the Fed’s decision
In a radio interview, ECB Vice President Luis de Guindos said that the “good news” regarding inflation will “sooner or later end up being reflected in the monetary policy”
Price Action News
Overlay of EUR vs. Major Currencies Chart by TradingView
It’s not me, it’s EUR!
The euro was the biggest loser at the start of the week as traders priced in (a) escalating tensions in the Middle East, (b) uncertainty over this week’s potential market catalysts, and (c) European Central Bank (ECB) Vice President Luis de Guindos supporting a possible interest rate cut by saying that progress on inflation will reflect on monetary policy “sooner or later.” Yipes!
EUR started its descent at the beginning of the European session and then gained enough bearish momentum to trade about 0.45% – 0.55% lower against NZD, AUD, and CHF. It’s down across the board, though, with the least losses seen against USD (just over 0.10%).
Upcoming Potential Catalysts on the Economic Calendar:
U.S. Treasury Office’s Quarterly Funding Announcement
Japan’s unemployment rate at 11:30 pm GMT
U.K.’s BRC shop price index at 12:01 am GMT (Jan 30)
Australia’s retail sales at 12:30 am GMT (Jan 30)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
EUR/JPY: 15-min
EUR/JPY 15-min Forex Chart by TradingView
As mentioned above, overall risk aversion and ECB interest rate cut bets helped drag the euro lower across the board.
EUR/JPY, in particular, was sold often enough that the pair is now testing the S1 (160.06) Pivot Point line in the 15-minute time frame. As you can see, the S1 area also lines up with an ascending channel support in the chart.Will we see a downside breakout today? Aside from the U.S. Treasury Office’s QRA, there are not a lot of top-tier reports scheduled today.
So, unless we see spikes in USD (and USD/JPY) demand, the euro will probably continue to lose pips against the yen. Plus, it kinda tracks with EUR/JPY’s late January trend.
A clear breakout below the 160.00 psychological handle puts a move to 159.75 on the table. A technical breakout, accompanied by a fundamental boost, may even draw in enough sellers to drag EUR/JPY to the 159.50 psychological level or S2 (159.40) Pivot Point area.
Of course, we’re not ruling out some kind of profit-taking ahead of this week’s potential market catalysts. A pull back up to the trend line resistance near the 160.50 Pivot Point area is still possible if traders adopt a risk-friendly tone in the next trading sessions.
For now, though, it looks like EUR/JPY is leaning towards waiting for a catalyst to extend its downtrend. Watch this setup closely, yo!
