Eurozone’s energy drama heats up as the weather in the region cools down!
Will growth concerns lead to a downside breakout for EUR/JPY?
As you can see, the euro has been showing higher lows and higher highs since the pair found a bottom at the 116.00 zone in May 2020.
Two years later, EUR/JPY zoomed up to 114.25 before sellers stepped in and rejected further gains.
The pair is now trading closer to 136.00, which is around the second “shoulder” of a Head and Shoulders pattern on the weekly time frame.
For newbies out there, Head and Shoulders patterns usually signal a reversal from an uptrend.
In EUR/JPY’s case, the “neckline” lines up with the 134.00 – 134.50 area that served as resistance back in June 2021.
Will EUR break below its neckline support?
Risk-takers were recently spooked by China cutting its interest rates as it hinted at weaknesses in the world’s second-largest economy.
Meanwhile, Russia’s Gazprom announced that it would perform “technical maintenance work” and halt ALL gas flows through Nord Stream 1.
I guess you could call it “No Stream 1” in those three days!
Not surprisingly, the announcement highlighted the region’s energy crisis and, together with global growth concerns, dragged EUR lower across the board.
Today’s PMI reports might help shape EUR’s intraweek trends.
Markets expect to see weaknesses from both manufacturing and services PMIs, so data misses could accelerate EUR’s downswing.
A drop below the 134.00 – 134.50 neckline could drag EUR/JPY to the 100 SMA near 132.00.
If the neckline support holds, though, or if USD/JPY strength bleeds to EUR/JPY, then we could see EUR retest areas of interest like 139.00 or 142.50.
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