EUR/JPY looks ready to bust out of a tight consolidation!
Will today’s market themes inspire a short-term bearish reversal for the pair?
In case you missed it, government bonds (and other risk assets, for that matter) have NOT been having a good week since Fitch downgraded the U.S. sovereign credit grade from AAA to AA+.
It doesn’t help the euro that the Eurozone has been printing mixed PMIs while headline inflation estimate in the region supports less rate hikes for the European Central Bank (ECB).
EUR/JPY 15-min Forex Chart by TV
The Bank of Japan (BOJ) isn’t shrugging off its rising bond yields, though!
Earlier today, the central bank announced another unscheduled bond-buying operation after its benchmark 10-year note hit a fresh nine-year high of 0.65%.
While the intervention may help limit JPY’s gains, the move also lowkey highlighted the BOJ’s attentiveness to market prices as well as the yen’s safe haven status.
This is probably why EUR/JPY is flirting with the bottom of a short-term consolidation near 156.25. Based on the long red candlesticks in the 15-minute time frame, it’s possible that we’ll see another round of risk aversion during the European session.
It may also help EUR/JPY bears that the 100 SMA has made a bearish crossover against the 200 SMA.
If the bearish momentum at the start of the European session carries over to the U.S. session, then EUR/JPY could find enough sellers to break below the S1 (156.12) Pivot Point level and head for the S2 (155.56) support area.
Not too sure about EUR/JPY breaking a range on its first try? You can also bet on some risk or profit-taking that could push EUR/JPY back to the 156.80 Pivot Point and mid-range line before EUR/JPY sees enough selling pressure to make new weekly lows.
What do you think? Is EUR/JPY ready for a bearish reversal?
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