EURJPY is trending lower inside a descending channel pattern and is about to test the resistance.

This lines up with the 200 SMA dynamic inflection point, which adds to its strength as resistance. 

The 100 SMA is below the longer-term 200 SMA to confirm that the path of least resistance is to the downside. This suggests that the selloff is more likely to resume than to reverse.

Stochastic is on the move up but is also hitting overbought levels to show that buyers are getting exhausted. Turning lower could lead to a return in selling pressure that might take the pair back down to the channel support at 131.00.

ECB Governor Draghi was relatively optimistic in his latest testimony as he acknowledged that euro zone growth has been robust and that the labor market could see more improvements. However, he also warned that financial market volatility and currency movements warrant close monitoring.

As for the yen, the BOJ core CPI is due today and a slower pace of increase at 0.6% compared to the earlier 0.7% rise is eyed. This could keep traders on the lookout for more easing remarks from central bank officials.

Later today, the euro zone will print preliminary CPI readings from its top economies. German flash CPI could rebound by 0.5% while Spanish flash CPI could accelerate from 0.6% to 0.9%. There are no other reports due from Japan but yen pairs could be sensitive to dollar action resulting from new Fed Chair Powell’s testimony.

By Kate Curtis from Trader’s Way