EUR/JPY: Current 109.91 (Sunday, Aug 14, 2010).

Trend: Volatile sideways.
 
Outlook: More downward but volatile movement.

Please refer daily charts and not short-term charts e.g. hourly charts.

Fundamentals (Recent economic releases):

1) EU: Sentix Investor Confidence (August) release much better as compared to the previous release as well as the expectations.
2) EU: (Germany) Consumer Price Index releases for Month on Month and Year on Year better as compared to the previous release as well as the expectations.
3) EU: Industrial Production data less as compared to the previous release as well as the expectations.
4) EU: (Germany) GDP preliminary releases much better as compared to the previous release as well as the expectations.
5) EU: (Overall) GDP data releases much better as compared to the previous release as well as the expectations.
6) EU: Trade Balance releases better as compared to the previous release as well as the expectations.
7) EU: Germany, Europe’s largest economy expanded at the fastest pace since the country’s reunification in the second quarter. But Greece’s recession deepened. The concerns are about the wide gaps in performances.

8) Japan: The sentiments that Bank of Japan may soon intervene to stop Japanese Yen weakening are fading. But this has to be watched closely as the pressures are mounting.
9) Japan: Not much market moving releases during the past week.
 
Technicals and Market perception:

1) ADX: +DI line crossed below the –DI line and though ADX is much below 25, it indicates further fall.
2) Daily MACD line shot down the signal line after running flat for some time.
3) Ichimoku Cloud: EUR/JPY fell below the cloud after a price action over 2 weeks price action above the cloud.
4) Break of 110.00 psychological level support made the bearish sentiment stronger.

Analysis: EUR/JPY could not break above the psychological resistance of 115.00 and had gone into volatile sideways mode before having a sharp fall. The break below 110.00 again makes the bearish sentiment stronger. With bearish outlook we expect some sideways movement and in case EUR/JPY breaks the support of 109.20 then we would expect a further move down to retest 107.30 (June 29th’s support level). A break below that should bring a new recent time bottom towards 105.50

On the upside the resistance level of 112.00 is important and if EUR/JPY breaks above it then we would expect it to retest 114.70 level (117.72). Over all our outlook will remain bearish till the psychological resistance of 115.00 is broken.

Approach: We will be short-selling EUR/JPY for short-term trading positions at each upward correction.

(Please join the News Letter or Register to get email alerts when the analysis is updated) 

For short term Forex trades, please refer to daily technical analysis for EUR/JPY.

(Please note that the color (colour) schemes used are for the outlook for the currency pair and not for individual currency.