EUR/JPY sellers in search for a stronger technical break to the downside
The low today touched 122.34, and that is the weakest level the pair has traded since 20 July. But on the daily chart, the pair is pretty much flirting with support from the 28 September low @ 122.38 currently.
The difference for sellers is that previously, they had to conted with the 100-day MA (red line) as a key level for buyers to lean on. This time around, that level has been breached.
The close below the 100-day MA yesterday is a tick in the box for sellers to build further momentum and now a daily break below the support level mentioned above will be the next step to establish further downside momentum in the pair.
Looking at the short-term fundamentals in the pair, things are shaping up rather well for sellers this week. In the case of the euro, it has to deal with the worsening virus situation and imminent shutdowns set to be announced by Germany and France.
As for the yen, the retreat in bond yields amid pre-election stimulus hopes vanquishing and the uncertainty that is to come ahead of the US election are perhaps reasons to argue for short-term gains in the currency for the time being.
Of course, the risk-off mood due to virus concerns are also part of the equation.
From a technical perspective, a drop below 122.38 and the 38.2 retracement level @ 122.25 sets up a slippery slope towards the 200-day MA (blue line) @ 121.15 next.
That will be the key break to watch for in case the downside momentum extends.
As for buyers, there is much work to do in order to hang out to the support levels mentioned. The fundamental outlook isn't looking great, so this will be a major test of their resolve to 'stay in the game' over the coming sessions.
