Chart of The Day EURJPY

EURJPY Probable Price Path & Potential Reversal Zone

US equities printed another effectively flat day, but that declines at open were consistently recovered intraday could be taken as a positive. EZ equities remained largely heavy. The heavy tone in equities also exerted a downward drag on the UST yields. Meanwhile, bitcoin has been relentless, punching through the US$50,000 mark, and now north of US$52,000. Market sentiment remains resilient.

The broad USD was firm throughout Wed, but failed to extend further when the break-out retail sales prints were released. The greenback outperformed against the European complex, but only marginally firmer against the AUD and CAD. Cyclicals still see better support from risk dynamics and a supported crude complex. The JPY regained its losses on Tue, with the USDJPY and JPY-crosses broadly lower as backend UST yields slip.

The Jan FOMC minutes released overnight reinforced that the Fed is still a distance away from pulling the ultra-accommodative stance. If anything, the Fed continues to sound very cautious on US macro recovery. US data releases show resilience (see sharp advance in retail sales yesterday). Segments of the market should have that same inkling too, but Fed has been pouring cold water on it. This prevents markets from viewing the US as a recovery leader out of the pandemic, and that fundamentally holds back USD at this point.

From a technical and trading perspective, EURJPY broke from range resistance at 127, trading into the 1.272 Fibonacci extension, weekly and monthly projected range resistance, yesterday’s candle printed a key reversal pattern accompanied by significant momentum divergence, trapping breakout players, as 128 acts as resistance bearish exposure should be rewarded ona breach of the overnight lows targeting a test of ascending trendline support at 126, watch for bullish reversal patterns here to reverse short positions to target a move to test 129

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