EUR/JPY Recovers Above 126.00, But Facing Uphill Task

Key Highlights

  • EUR/JPY started a fresh upward move from the 125.00 support zone.
  • A few important hurdles are seen near 126.55 on the 4-hours chart.
  • The Eurozone ZEW Indicator of Economic Sentiment improved from 54.4 to 58.3 in Jan 2021.
  • The Eurozone CPI (to be released today) is likely to decline 0.3% in Dec 2020 (YoY).

 

EUR/JPY Technical Analysis

After a steady decline, the Euro found support above 125.00 against the Japanese Yen. EUR/JPY traded as low as 125.05 and recently recovered over 100 pips.

Looking at the 4-hours chart, the pair broke a couple of major hurdles near 125.80 and 125.90 to move into a positive zone. There was also a break above a key bearish trend line with resistance near 125.90.

An immediate resistance is near the 126.30 level and the 200 simple moving average (green, 4-hours). It is close to the 50% Fib retracement level of the downward move from the 127.49 high to 125.05 low.

The next major resistance is near the 126.55 level and the 100 simple moving average (red, 4-hours). To continue higher, the pair must clear the 126.30 and 126.55 levels. If it succeeds, the next hurdle for the bulls could be near 127.20.

Conversely, the pair could correct lower below the 125.90 and 125.80 support levels. The next major support is at 125.50, below which the pair could revisit 125.00.

Looking at EUR/USD, the pair traded as low as 1.2053 before it started an upside correction. GBP/USD is stable above 1.3550, but it is still facing a major resistance near 1.3700.

Economic Releases

  • UK Consumer Price Index Dec 2020 (YoY) – Forecast +0.5%, versus +0.3% previous.
  • UK Core Consumer Price Index Dec 2020 (YoY) – Forecast +1.3%, versus +1.1% previous.
  • Eurozone Consumer Price Index Dec 2020 (YoY) - Forecast -0.3%, versus -0.3% previous.
  • Eurozone Consumer Price Index Dec 2020 (MoM) - Forecast +0.3%, versus -0.3% previous.
  • Canadian Consumer Price Index Dec 2020 (MoM) – Forecast 0%, versus +0.1% previous.
  • Canadian Consumer Price Index Dec 2020 (YoY) – Forecast +1%, versus +1% previous.