European stock indices rapidly grew amid markets expectations that the agreement between Greece and its creditors can be finally reached after Greece submitted a new reforms proposal.
European stock markets optimism and the Chinese stock market rebound (Shanghai Composite grew by 4.5% at the market close) affected Yen dynamics. Since opening today, the pair EUR/JPY lost nearly 300 points, while USD/JPY lost 100 points as investors started selling the safe-haven Yen.
The fall of the pair is restricted by the following fundamental factors: the Fed policy tightening rhetoric and extra soft monetary policy by the Bank of Japan. Thus, the pair’s local lows can still be viewed as an opportunity to open long positions.
The Fed Chair Janet Yellen speech is due today at 7 pm (GMT +3), which may cause an increased volatility in pairs with the USD.
Traders should be careful as on Monday the market can open with a gap in both pairs EUR/JPY and USD/JPY.
Support and resistance
The pair reached the resistance level at 122.35 (EMA50 on the daily chart, 50% Fibonacci) and the growth is probably exhausted.
The pair found the support level at 120.60 and a fall below 120.20-120.00 is unlikely. At the same time, if the pair manages to close at 122.35 that could become an excellent level for further growth towards May highs.
OsMA and Stochastic on the 4-hour chart give buy signals. On the daily chart, they are also turning to form buy signals.
The pair return to 120.00 is possible from the technical point of view but is unlikely from fundamental perspective.
Support levels: 121.60, 120.70, 120.10, 119.70.
Resistance levels: 122.80, 123.15, 123.50, 124.10.
Open long positions from 120.10, 120.70, 121.60 with targets at 122.35, 122.80, 123.15, 123.50.
Short positions can be opened after the breakdown of the level of 121.60 (with appropriate indicators signals) with targets at 120.70, 119.70.