The Euro is tumbling against safe haven currencies, such as the US dollar, the Swiss Franc, and the Japanese Yen. Following a downward revision to the French June services PMI, markets are lowering their bets that the European Central Bank will not be able to follow through with an aggressive rate hiking cycle, as the Eurozone’s economic outlook worsens.
The EURJPY on the D1 time frame was in a strong uptrend that made a higher top at 144.278 on 28 June. The bears found the price attractive at those levels and the currency pair started to roll over.
A closer look at the Momentum Oscillator reveals negative divergence between point “a” and “b” when comparing the tops at 144.245 and 144.278. This could have alerted technical traders that the bulls were running out of steam. After the top at 144.278 the price broke through the 15 and 34 Simple Moving Averages (SMA) and the Momentum Oscillator changed course to the downside, both also confirming bearish action in market.
A possible critical support level formed when a lower bottom was recorded at 139.648 on 1 July. Bulls then tried to push the market up without much success and the price formed a lower top on 5 July at 142.432.
If the bears continue their roll and manage to break through the critical support level at 139.648, then three possible price targets can be projected from there. Attaching the Fibonacci tool to the lower bottom at 139.648, and dragging it to the lower top at 142.432, the following targets may be calculated. The first target can be estimated at 137.927 (161.8%). The second price target may be calculated at 135.142 (261.8%) and the third and final target might be expected at 130.637 (423.6%).
If the resistance level at 142.432 is broken, the above scenario is cancelled and must be re-assessed. As long as the bears stay in control, the outlook for EURJPY on the D1 time frame will remain negative.
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