The EUR/JPY cross pair broke higher out of a triangular pattern that resembles a pennant. While the price did not reach the measured move yet, it did move out of a rising channel, a move that typically suggests overbought levels.
The JPY pairs are all bid across the dashboard as the JPY is taken a beat, just like the CHF does. The market is in a risk-on move with major dollar pairs at their highs or pressuring the highs. With the JPY pairs trading with a bid tone as well, the risk-on move appears to have more legs to the upside.
However, the EUR/JPY cross trades in a correlated fashion with the USD/JPY and benefits from the bid tone in the EUR/USD pair. Any change in the two will likely change the EUR/JPY trajectory as well.
The risk-on move benefited from the Fed’s Powell testimonies on Tuesday and Wednesday. He reiterated that the Fed has no intentions of withdrawing the stimulus yet, and so the markets interpreted his words as a green light to buy some more equities.
The pennant’s measured move points to higher levels, and we may even see 130 and beyond. However, bears may want to sell a move above 130 with a stop at 131.50 and target a move back towards 125 on the back of overstretched levels and a move back into the channel.
