With a few mid-tier catalysts on the eurozone’s docket, I’m counting on a bit more action for this currency pair.
Japan printed downbeat results in the earlier session, which could mean that this uptrend on EUR/JPY could carry on.
Before we check out the chart setup, here are the major headlines you might have missed in the last few hours:
Currency Snapshot
Fresh Market Headlines & Economic Data:
- Australia deploys police and military to enforce border closure
- Fed official Bostic: U.S. economic recovery may be levelling off
- Asian shares pause on rallies as second wave concerns pick up
- Japanese average cash earnings down 2.1% vs. projected 0.9% drop
- Japanese household spending sank 16.2% vs. projected 11.8% decline
- RBA kept interest rates on hold at 0.25% as expected
- Japanese leading indicators up from 77.7% to 79.3%
- Australia’s state of Victoria announced six-week lockdown for Melbourne
Upcoming Potential Catalysts on the Economic Calendar:
- German industrial production at 7:00 am GMT
- French trade balance at 7:45 am GMT
- SNB foreign currency reserves at 8:00 am GMT
- U.K. Halifax HPI at 8:30 am GMT
- Italian retail sales at 9:00 am GMT
What to Watch: EUR/JPY
This pair is cruising above an ascending trend line connecting the lows since mid-June and looks prime for another test of support soon.
Applying the Fib tool shows that the 50% to 61.8% retracement levels line up with an area of interest and the trend line support where buyers might be waiting.
A handful of mid-tier reports are coming up from the eurozone during the London session. This includes the German industrial production figure, French trade balance, and Italian retail sales figures that are expected to show improvements.Apart from these, the sentiment for the euro is overall positive as market participants are hoping to see more signs of agreement among officials when it comes to the allocation of the EU Recovery Fund.
Just be mindful, though, that a bit of risk aversion has been in play on account of lockdowns being reinstated in some areas due to a resurgence of COVID-19 cases.
Technical indicators suggest that EUR/JPY could still carry on with its climb, as the 100 SMA is above the 200 SMA while Stochastic is bottoming out from the oversold region.
If you’re planning on taking this setup, don’t forget to look at the average EUR/JPY volatility in setting entries and exits!
