Forex News: EUR/JPY Sell-off Accelerates After Weak Euro Data

on Oct 7, 2014
Updated: Sep 16, 2019

Technical Sentiment: Bearish

Key Takeaways

  • German Industrial Production down -4.0% in August, well below the consensus;
  • The Euro currency traded lower against a basket of currencies following this news;
  • EUR/JPY is heading for 136.40, followed by 135.70.

Weaker than expected data, concerning German Industrial Production, prompted traders to sell the euro currency against pound, yen, Australian dollar and kiwi in early trading.

Technical Analysis

Starting with the second half of September, markets have not been kind with EUR/JPY as the pair collapsed more than 400 pips from its top at 141.20. On its way down the currency pair broke through several major support levels, including the 200-Day Simple Moving Average and a huge cluster at 138.00 formed around a pivot zone, 61.8% Fibonacci retracement and the 50-Day and 100-Day SMAs. As a direct consequence, EUR/JPY remains extremely bearish despite Stochastic entering oversold territory on the Daily timeframe.

Since crossing below the 50-Day Simple Moving Average on 1st October, bears took a breather as price began showing respect 137 as support and 50-SMA as resistance. Today’s sell-off indicates a strong tendency to leave this area behind. Price action has formed a Bearish Engulfing Bar on the Daily timeframe and EUR/JPY is trading below 137, currency at 136.75 ahead of the U.S. session.

An intermediary support level can be identified at 136.20; however the main attraction point for sellers should be somewhat lower at 135.70/80. A bounce is very likely in this area since sellers should allow for a future re-test of 138.00 before the bottom falls off again.