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Manufacturing and services PMIs from the euro region are due today!

While others have their eyes on economic data releases, other traders are pricing in geopolitical tensions between Russia and Ukraine.

Will today’s events extend or break EUR/JPY’s downtrend?

EUR/JPY: 1-Hour

EUR/JPY 1-hour Forex Chart

EUR/JPY 1-hour Forex Chart

Fundamentals & Catalysts

Later today we’ll see manufacturing and services PMI reports from Germany, France, and the Eurozone. Markets are expecting February’s numbers to show improvements as the impact of the Omicron variant fades from January.

Of course, any gains may be capped by geopolitical concerns in Ukraine. U.S. Secretary of State Antony Blinken and Russian Foreign Minister Sergey Lavrov will meet on Thursday while Presidents Putin and Biden have agreed “in principle” on a summit to discuss de-escalation “if an invasion hasn’t happened” by then.

Judging by the increase in Russian troops along Ukraine’s borders, though, Thursday’s meetings may not push through.

Further escalation in geopolitical tensions may extend EUR/JPY’s downtrend as the common currency is sold while traders buy the safe-haven yen.

Price Action

EUR/JPY has been on a downtrend since two weeks ago but there were enough bulls at the 130.00 area to prevent further losses.

Today, EUR/JPY is testing a trend line resistance while Stochastic hints of a bearish divergence on the 1-hour chart. It also doesn’t help the euro that the 100 SMA has crossed over the 200 SMA, something that has led to sustained directional trends the last three times that it happened on the chart.

Bears who are betting on the euro taking hits from Ukraine’s tensions can start scaling in at current levels and aim for last week’s lows. You can even aim for February’s lows if there’s enough momentum.

If we don’t see escalations in geopolitical tensions today, or if traders focus on stronger PMIs from the euro region, then EUR/JPY may break above its trend line resistance and head for last week’s highs near the 200 SMA before the sellers step in.

If you’re not sure about shorting the euro against the yen, then you can also wait for catalysts or momentum before you enter your trades.

Whichever direction you choose to trade, make sure got your capital covered with stop losses and a solid trading plan!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.