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EUR/JPY bears cap the reversal, case building for 128.50?

  • EUR/JPYcontinuess to drift lower on dollar weakness.
  • EUR/JPY headed to the base of the cloud at 130.98?

EUR/JPY is on the defensive vs the bearish drift emerging as a cap on the reversal attempts to 14th Nov. downside from 133.88. Currently, EUR/JPY is trading at 131.72, down -0.21% on the day, having posted a daily high at 132.13 and low at 131.47.

All about ECB communications for EUR markets - ING

The Japanese yen has accelerated while the US dollar continues to slide ahead of the release of the FOMC minutes as the release of a much weaker-than-expected US durable goods orders data was printed as a monthly contraction of 1.2% for October vs the expected +0.3%. DXY has ranged between 93.611 - 93.962 down -0.36% at the time of writing. Meanwhile, stocks have moved into a phase of consolidation in thinner markets ahead of the Thanksgiving holidays.

Eyes on EUR risk reversals

As for the domestics for the EZ, recent ECB media coverage has centered on the outlook for 2018 and the shift to conventional policy with policymakers anticipating modest adjustments to forward guidance, noted analysts at Scotiabank, adding, "Longer-term (10Y) spreads appear to be stabilizing, offering modest support to EUR, and risk reversals are once again pricing a modest premium for protection against EUR strength."

EUR/JPY levels

As for technicals, analysts at Commerzbank explained that EUR/JPY sold off yesterday and continues to look like a potential top pattern. "This is the third time in the past 2 months that the market has failed at 134.58 and this is viewed very negatively. Ideally, we would like to see a close below the base of the cloud at 130.98 to confirm losses to 128.50 and the 127.57 August low. Intraday Elliot wave counts are still suggesting scope to retest 134.58. Where are we wrong near term? Above 134.58 November 2015 high. Above here would target the 2008-2017 resistance line at 140.72/141.00," the analysts noted further.

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