EURJPY Bearish Bias Persists, More Downside Likely

Summary:

EURJPY trades with a bearish tone as 120 attracts price. The ECB stepped up the dovish intervention and the cross benefits from a stronger Yen too.

The EURJPY cross trades with a bearish tone ever since it reached 127. Just like the EURUSD failing at the 1.20, the EURJPY reversal comes in the context of dovish comments from the ECB and concerns about a stronger currency.

The cross pair formed a triple top formation, and the price did not yet reach the measured move. On top of that, the round 120 level attracts price as well.

The ECB Stepped Up the Verbal Intervention

Following the last ECB meeting, the central bank stepped up its verbal intervention. In a series of interviews and blogs posted on the central bank’s website, various ECB members expressed concerns posed by a stronger currency.

Now that the EURUSD trades three big figures below the 1.20 and the EURJPY eased below 123, expect the ECB to soften the tone. However, one cannot ignore the ECB’s willingness to talk the Euro down, and now traders know what the point is the talking intensifies – 1.20 in the EURUSD and 127 in the EURJPY.

Eurozone Flash Services PMI Disappoints

Today’s Eurozone flash services PMI for the month of August came out at 47.6, a four-month low. While the PMI manufacturing shows expansion, the Euro area is a service-based economy, with more emphasis on the services sector. Hence, the chances are that the services sector will weigh on the upcoming GDP data, putting further pressure on the ECB to ease.

EURJPY Technical Analysis

For once, the technical picture looks crystal clear. The measured move remains open and completes only at 121.50. Once there, the 120 round number is likely to attract the price too.

To trade on the short side, bears have two options. One is to wait for a pullback to the previous higher low in the bullish trend. When it comes, bears would like to go short targeting 121.50 and then 120, while having a stop-loss order at 125.50.

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