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EUR/JPY: Bearish outside day, downside risk builds up

FXStreet (Bali) - EUR/JPY is treading water around 142.50 after registering a major bearish outside daily reversal on Thursday, as a result of a late Asia Yen liquidation prior to a more dovish-than-expected ECB press conference.

Both the Euro and the Japanese Yen are two of the weakest contenders in the FX space - AUD, NZD also making merits -, with their respective central banks either about to embark on a full-blown QE program - in case of the ECB - or already fully immersed in a second QE experiment - in case of the BoJ -. However, one may start to perceive bigger risks to the downside on the pair as QQE2 in Japan has been now discounted for one week, while the unexpected early QE hint by the ECB had only one session to be digested.

Technically, Valeria Bednarik, Chief Analyst at FXStreet, notes: "In the 1 hour chart, 100 SMA offers immediate short term support with price posting a shallow bounce from it early US session, albeit indicators present a strong bearish slope into negative territory, which keeps the risk to the downside. In the 4 hours chart indicators ease towards their midlines, whist price gave up barely the 23.6% of its post BOJ advance, making of the downward move a correction so far that can extend down to 141.30, September high, with actually being a game changer for the upward trend."

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