By: Mike Kulej
Like most of the Japanese Yen pairs, the EUR-JPY is not very clear about what to expect next. Following the intervention in the Yen couple of months ago, the price rallied strongly to over 123.00. The next drop to 116.46 seemed like a typical correction after a 1700 pips advance.
However, as soon as the uptrend started to resume, commodities came under pressure, sending shockwaves through currencies. For the EUR-JPY that meant another sell off, this one to 113.40, where the price found support around the 100 SMA and some earlier previous reaction levels, as well.
Currently the EUR-JPY rebounded to 116.85, but it is still not clear if this rally is for real or simply a bounce after the latest sell off. That might be decided soon. This level is where the price found support in April and now it became a resistance. What happens here during the next 1-2 trading days might decide the direction for a few weeks.
Very short term, the Stochastic indicator suggests the EUR-JPY could turn down again from here. Recently, when it reached oversold/overbought readings, the market turned, too. At present, the indicator is overbought, pointing to a minor top. We will know on Friday, maybe Monday.