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    IronFX Intraday Comment | EUR/JPY | 25/01/2016

    • The dollar traded higher against most of its major counterparts during the European morning Monday, ranging from 0.38% against NZD to 0.13% vs SEK. The greenback traded lower against JPY, while it remained virtually unchanged against EUR and CHF.

    • Germany’s Ifo survey for January showed that the sentiment of German businesses deteriorated in the beginning of 2016. All three indices missed their forecasts and declined from the previous month, with the expectations index deteriorating the most. The disappointing results come on top of the decline in both manufacturing and service-sector PMIs as well as a decline in the ZEW expectations index, all for the same month. Today’s Ifo survey reflected the same concerns among German businesses as the other soft indicators, namely that the slowdown in China and other large EM economies may weaken German exports in the foreseeable future. Businesses may take some comfort however in the fact that their concerns are shared by the ECB, following President Draghi’s dovish rhetoric last week that the Bank may reconsider its policy stance in March. Even though we previously expected the expectations index to continue its decline until the slowdown in China appears to stabilize, the strong likelihood that the Governing Council may reconsider to ease further might cause the indicator to rebound in the near-term.

    • EUR/JPY traded lower during the European morning Monday after it hit resistance once again at the 128.50 (R1) resistance barrier. The inability of the bulls to overcome that resistance zone makes me believe that the negative wave is likely to continue, perhaps to challenge again the 127.40 (S1). A dip below that support is possible to extend the decline towards the next obstacle at 126.75 (S2). Our short-term oscillators support somewhat the case for the pair to continue a bit lower. The RSI turned down, now stands near its 50 line and could cross below 50 soon. The MACD has topped slightly above zero and looks able to fall below its trigger line. Switching to the daily chart, I see that on the 4th of December, the rate started tumbling after it hit resistance near the downtrend line taken from the peak of the 21st of August. Therefore, although the pair has been in a sideways mode since the 5th of January, I would consider the longer-term path of EUR/JPY to still be negative.

    • Support: 127.40 (S1), 126.75 (S2), 126.15 (S3)

    • Resistance: 128.50 (R1), 129.00 (R2), 129.60 (R3)

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