EURJPY Heading To 120 On ECB Deflation Worries

Published by
Written By: Mircea Vasiu
Share
    Summary:
  • EURJPY keeps a bearis tone heading into the HICP release next Friday. The bias is it will break below 120 on inflation falling closer to zero.

The EURJPY pair bounced higher right after it completed a triple top formation around the 127 level. A triple top is a tricky pattern, as many traders view it as the start of an ascending triangle rather than the beginning of a reversal pattern. However, now that the price reached the measured move, the bias is that the recent bounce is just that – a bounce.

HICP Inflation To Drop Further

This week is all about the HICP data in the Euro area. Two days from now, right ahead of the NFP release in the United States, we will see the core inflation in the Euro area for the month of September.

The bias is that the core inflation data will slip below the 0.4% registered last month. If that is the case, the ECB cannot and will not remain indifferent to such a drop and will likely act in the couple of meetings it has until the end of the year.

On Tuesday, the German preliminary CPI came out worse than expected at -0.2% on -0.1%. The French and Italian CPI’s revealed the same trend.

It means that the risks are tilted to the downside when it comes to the overall inflation data to be released next Friday. For traders ready to act on the weakening inflation front, shorting the Euro is the logic game in town.

EURJPY Technical Analysis

The EURJPY evolved in a rising channel since the pandemic hit the Western world in March. A clear break below the lower edge of the channel opens the gates to the channels measured move. Also, it means that the EURJPY drop will exceed the 120 round number, offering a solid risk-reward ratio for courageous bears.

Bears would like to wait until the EURJPY breaks below the 122.30 level. Such a break targets 119 and below, while the invalidation sits at 124.

For more about how to trade technical analysis patterns, consider our Forex trading course.

EURJPY Price Forecast

Written By: Mircea Vasiu

Mircea, MBA in International Business graduating Magna Cum Laudae, trades for a living and contributes to various financial publications for more than six years. He writes about macroeconomics, stock indices, currencies, and most recently ETFs and individual stocks. For the past decade, he’s involved in everything trading related, mostly in the currency market, both with manual and algorithmic trading.

Published by
Written By: Mircea Vasiu