Traders sided with the near term possibility of a rate hike in the Euro region, the EURJPY currency cross pair suffered under bidding for the asian denomination throughout the session. Boosting some initial demand for the Euro were comments made by Bundesbank President Axel Weber. Overshadowing comments made yesterday by ECB President Trichet, statements by Weber were taken were heavily considered as they didn’t rule out a potential 50 basis point rate hike at the next rate setting meeting.

The return of Japanese markets on Monday should additionally add some activity in the market following a week of absence in observance of the holiday week.

The following technical analysis gives us a detailed lookout on what is expected to happen to EUR/JPY

The selling point is at 163.50; triggered by the breaking of the channel line and a failure to reach higher than the previous peak of 163.84. The market swings towards down and breaks the previous support of 163.44

- Fibonacci retracement at 61.8% represents the take profit line at 162.60 as the first
target and the second Fibonacci 61.8% represents longer period take profit line at
162.20.

- Previous resistance at 164.03 represents the stop loss.

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the crossing of the two moving averages
downwards and breaking of the zero line with high volume.

In order to find the power of the market, we use RSI (Relative Strength Index).
With RSI, we can determine the market is in a downtrend and breaks 30% line moving into oversold area;
The zero line of the ROC (Rate of Change) is very important to understand the strength of the market and as we see on the graph; it breaks the zero line and moves downwards.
We should always look at the channel line when we have a big movement in the market; and in this example it breaks out of the channel lines.
For the momentum oscillator we have to concentrate at the zero line and the trend of the oscillator. William %R shows us an aggressive downtrend.
Most of the indicators show us the weakness of the Euro against the yen and the reversal of an up trend that has happened in the last two weeks.

By Finotec’s professional analyst,
Tony B.

dealingdesk@finotec.com