A few days back, EURJPY broke out of its range visible on the 4-hour time frame and reached a high of 117.50. 

From there, price showed signs of a retracement and applying the Fib tool on the latest rally shows that the 38.2% level is close to the broken range resistance at 116.00.

The 100 SMA is above the 200 SMA so the path of least resistance is to the upside, which suggests that the rally could resume at some point. The moving averages could also hold as dynamic support near the 50% Fib.

Stochastic is heading down for now so sellers are in control of price action and could allow the correction to continue. Once the oscillator reaches the oversold area and turns higher, buyers could return to the game.

The euro has been turning lower against most of its peers as traders anticipate political uncertainty during the Italian referendum. Although this won’t likely result in the country leaving the euro zone, it could still have repercussions on the country’s banking sector and economic outlook.

There were no reports out of the euro zone yesterday while today has the final CPI readings due. Any downgrades could put more weight on the shared currency. The ECB minutes are also up for release today.

As for the yen, there have been no major reports released recently so the lower-yielding Japanese currency has been moving to the tune of market sentiment. Risk-off flows could continue to favor the yen while a return in risk-taking could lead to losses.

By Kate Curtis from Trader’s Way