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    IronFX Intraday Comment | EUR/JPY | 29/01/2016

    • The dollar traded higher or unchanged against all of its major counterparts during the European morning Friday, ranging from 0.75% against NOK to 0.16% vs JPY. The greenback remained virtually unchanged against EUR.

    • Eurozone’s preliminary CPI rate accelerated to 0.4% yoy in January, from 0.2% yoy the previous month, in line with expectations. This should provide some slight comfort to the ECB following President Draghi’s concerned comments last week that inflation was likely to run low or negative in the coming months. While this may temporarily push back the easing expectations that Mr Draghi brought forth at the last meeting, investors and policymakers are likely be skeptical over these data. The effects from the drop in oil as well as food prices early last year have faded out of the 12-month calculation, providing the CPI with a temporary boost, but the underlying trend of inflation still looks soft. The persistent drop in commodity prices and the slowing growth in China and other EM economies are likely to continue to weigh on consumer prices, making it harder for the ECB to achieve its inflation target. We have another round of inflation data ahead of the March meeting, which are the ones Mr. Draghi and his colleagues will be working with. If the February report reveals a slowdown, this would be a sign that today’s improvement was just a technical adjustment and could increase the possibilities for the Bank to pull the trigger once again at the next meeting.

    • EUR/JPY skyrocketed during the Asian day Friday after the BoJ surprised the markets with a rate cut into the negative territory. The pair hit the medium-term downtrend line taken from the peak of the 21st of August and remained elevated during the European morning. On the 4-hour chart, the rate still stands above the short-term uptrend line drawn from the low of the 21st of January, something that still keeps the near-term positive path intact. In my opinion, the pair is now testing a critical technical point, as a clear close above the aforementioned medium-term downtrend line is likely to change the pair’s outlook and could set the stage for larger bullish extensions. Our short-term oscillators reveal strong upside speed, a sign that there is plenty of power for an aggressive break higher. The RSI emerged above its 70 line, while the MACD, already above both its zero and signal lines, accelerated higher and is pointing north. On the other hand, if the bears are willing to take control one more time near the medium-term downtrend line, I would expect them to pull the trigger for a move even below the 131.00 (S2) barrier, something that is possible to initially aim for the 130.25 (S3) support line, defined by Thursday’s inside swing high.

    • Support: 131.40 (S1), 131.00 (S2), 130.25 (S3)

    • Resistance: 132.30 (R1), 132.80 (R2), 133.50 (R3)


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