The euro zone is set to release its GDP readings for the second quarter of the year and is widely expected to show disappointments, possibly a chance to hop in a euro short trade. EUR/JPY is currently testing the falling trend line on its 4-hour time frame and this might hold as resistance for the day.

Weaker than expected GDP readings could lead to a sharp selloff from the pair’s current levels to new lows below the 135.00 mark. Stochastic is in the overbought zone and starting to move lower, indicating that sellers are ready to push EUR/JPY back down.

On the other hand, strong data could lead to an upside break from the trend line and probably a reversal for the pair. A break above the 137.00 handle could mean more gains for the pair.

By Kate Curtis from Trader’s Way.