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IronFX Intraday Comment | EUR/JPY | 07/12/2015

• The dollar traded higher against all of its G10 counterparts during the European morning Monday in the absence of any major market moving events. The main losers were NOK, AUD, NZD and EUR in that order.

• After the amazing rally we saw on the euro following the ECB policy decision, the common currency started giving back some of its gains. On Friday, ECB President Mario Draghi delivered a speech in New York in which he attempted to reassure investors that the ECB’s actions were of greater magnitude than the market might have acknowledged. He stated that while the size of the QE program was not expanded, the promise to repurchase the maturing bonds would effectively increase the stimulus program by €320 billion in total. He also pledged that QE’s duration would be extended indefinitely until the inflation objective has been reached. Most notably he noted that “there cannot be any limit to how far we are willing to deploy our instruments, within our mandate”. Those comments added some fuel to the pullback in the common currency, which continued falling today during the European morning. Draghi’s comments pushed EUR/USD below the 1.0900 hurdle, and today the rate fell below our support of 1.0830, something that could target the 1.0765 barrier, marked by the inside swing high of the 19th of November.

• EUR/JPY traded lower during the European morning Monday after finding resistance near the 134.00 (R1) line. Currently the rate looks to be headed for another test near the 133.30 (S1) support zone, where a clear break is likely to see scope for more bearish extensions perhaps towards our next support zone of 132.75 (S2), defined by the inside swing peaks of the 10th and 12th of November. Our short-term oscillators support that today’s setback is likely to continue for a while. The RSI exited its overbought zone and now looks to be headed towards its 50 line, while the MACD has topped and fallen below its trigger line. On the daily chart, I see that the rally following the ECB decision hit resistance at 134.60 (R2), near the downside resistance line taken from the peak of the 21st of August. Therefore, as long as the rate remains below that trend line, I would consider the longer-term picture to be cautiously negative and I would expect EUR/JPY to continue lower in the foreseeable future.

• Support: 133.30 (S1), 132.75 (S2), 132.20 (S3)

• Resistance: 134.00 (R1), 134.60 (R2), 135.00 (R3)

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