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FX analysis

Chart of the week – EUR/JPY bullish momentum sighted ahead of Eurozone inflation data

Euro

Chart of the week – EUR/JPY 

EUR/JPY bullish momentum sighted ahead of Eurozone inflation data

Short-term technical analysis (1 to 3 weeks)

(click to enlarge chart)

Time stamped: 26 Jun 2022 at 12:00pm SGT 

Source: CMC Markets

  • The Eurozone will release a key economic data this coming week; preliminary flash inflation numbers for June of its bloc members (after a red hot all-time high reached in May); Germany on Wednesday (29 June), France on Thursday (30 June) and the combined Eurozone bloc on Friday (1 July).
  • This set of inflation data will have a significant influence on ECB’s monetary policy forward guidance; especially on the trajectory and magnitude of its interest rate hike cycle that is expected to kick start in July. Hence, the Euro related foreign exchange pairs may see significant movements ex ante and ex post upon the release of these inflation data.
  • Integrated technical analysis (graphical, momentum & Elliot Wave/fractal analysis) suggests that the EUR/JPY cross pair’s impulsive up move sequence of its medium-term uptrend phase in place since 7 March 2022 low of 124.40 is likely to have resumed after a minor pull-back of 640 pips from its 8 June 2022 high of 144.25.
  • Bullish bias with 137.85 as the key medium-term pivotal support for a potential up move on the EUR/JPY to retest 144.25 before the next resistances at 146.70 and 148.30/149.40. However, a 4-hour close below 137.85 invalidates the bullish scenario for a deeper corrective down move towards the next support at 133.90/132.90 (former swing high of 1 June 2021 & swing low of 12 May 2022).
  • Positive elements; the recent pull-back of 284 pips from its 22 June 2022 high of 144.25 has managed to stall and bounced off from its 50-period moving average, the 4-hour RSI oscillator has flashed out a prior bullish divergence signal at its oversold region on 13 June/16 June 2022 and thereafter printed a higher low which reinforces a revival of short-term upside momentum and price actions have continued to oscillate within a medium-term ascending channel since 7 March 2022 low with the upper boundary of the ascending channel now confluences with a resistance zone (determined by Elliot Wave/fractal analysis)  of 148.30/149.40.


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