Technical Trade Idea - Euro / Japanese Yen

Technical Trade Idea - Euro / Japanese Yen

A weaker European economy, as evidenced by an array of weakening data including lower business confidence, lower GDP growth, lower retail sales as well as declining PMI (Purchasing Managers Index) has seen the Euro come under pressure and reduced the markets expectations that quantitative tightening is to rapidly commence.

Against this backdrop, talks of trade wars, an fragile equity equity market as well as geopolitical tensions could see safe-havens asset such as the Japanese Yen find support.

Technically, the daily chart shows the price having traded in a downward trend and channel since early February of this year with the downward move driven by the above-mentioned factors. The year-to-date low was 124.61 (reached on 29-May) after which we saw a “risk-on rebound” toward the 130.00 level.

The weekly chart shows the price testing the underside of a bearish flag pattern.
Today’s Germany Zew Economic Sentiment Index saw a poor reading, with the index showing a negative print of 16.1 versus expectations of -14 which could see pressure on the Euro resume.

An image

On this basis, traders could look to sell the Euro against the Japanese Yen in anticipation of another leg lower.
These are the trade levels:
Sell/Short EURJPY at current levels 129.95 (down to 129.90)
Stop-loss: 130.70
Take profit target: 127.90 (medium term idea)

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