Dynamic support refers to support that follows the prices – this is where the EUR/JPY sits, testing a rising trendline for the third time in a row. Technical traders say that the ability of price to keep coming to support will end up with the support eventually giving way. Therefore the bias here is not bullish but bearish.
The Euro did not like the higher inflation data released yesterday. The core inflation, the one that does not use energy prices, reached a five-year high, climbing to 1.4%. While this is good news for the ECB as it struggled in the past to generate inflation, it spells troubles for Euro hawks because the ECB will not turn hawkish overnight.
The lag between the U.S. economy and the Euro area economies continues to grow. Because the ADP data yesterday showed a recovering labor market in the U.S., the risk is that the U.S. will overtake Europe in growth, and thus the Euro as a common currency is bearish.
On the JPY front, the rise in the USD/JPY pair is not that aggressive as the fall in the EUR/USD, so the cross should correct too.
On a break and close below the rising trendline, bears may want to go short with a stop at the previous lower high and target a new low below 125.09.
