EURJPY Bounces From Dynamic Support – 124 Possible
The EURJPY cross pair found it difficult to remain below 122 and bounced strongly from dynamic support. It eyes a move back to the 124 level, albeit Elliott Waves Traders may argue that this is nothing but a bounce to be sold.
The cross fell from 127 where it recently put a triple top. The decline that followed came in line with the overall market sentiment – waiting for more clarity from the European Central Bank (ECB) and the US elections.
During this year, the JPY has been one of the strongest currencies against the USD, besides the CHF. However, the EURJPY did rally from below 117 to 125, on the back of further European integration viewed as a result of joint debt issuance in the Eurozone.
Strong European Manufacturing Data
Yesterday’s manufacturing data shows a resilient sector. The PMI Manufacturing came at 54.8 on expectations of 54.4 – a slight relief considering what’s ahead for most European economies.
The virus takes its toll as winter seems to create favorable conditions for its spread. As such, the major European economies are in lockdown mode, albeit not that severe as in the spring.
Germany, France, Belgium, Italy, and most of Spain, have some kind of lockdown measures in place. Their impact will be seen in the Q4 economic performance, and some investment houses already began downgrading European economies. For example, JP Morgan announced that it revises European growth for the fourth quarter from a little over 2% to a little over -2%. In other words, over 4% of economic growth slashed on the back of the new lockdowns.
Sooner or later, the common currency will reflect this weakness, especially if other parts of the world will not go into lockdown mode anytime soon.
EURJPY Technical Analysis
The Elliott Waves Theory calls for a possible double combination on the EURJPY pair. If that is the case, bounces are normal, as seen in the case of the b-wave or the first intervening x-wave.
Aggressive bulls may want to buy for the upper edge of the falling channel, although the risk-reward ratio does not warrant the trade. Therefore, the best approach is for bears to wait for the price to reach 123.50 or so and go short for 120 while having a stop at 125.