The euro further increased gains against the yen and reached a four-year high prior to tomorrow’s data-rich day. The euro received a minor boost this morning at the German ZEW indicator came inline with estimates of 54.6, improving from 52.8. Tomorrow morning, Germany will report their PPI data, and then the US will have core CPI and retail sales early in the New York session. The yen has been on decline ahead of tomorrow’s Bank of Japan (BoJ) policy minutes.
The moderately positive European data has given the euro a boost, while both the yen and dollar have been weak on risk appetite.
The EURJPY hit four-year highs of 135.93 before pulling back. The intraday chart shows the pair treading into overbought territory with the RSI rising above 69, and EURJPY moving up over 100 pips without a pullback. The ADX is continuing upward along with the +DMI.
Currently trading at 135.7, EURJPY will retest the highs with price action support near 135.20 and Fibonacci support at the 23.6 percent level, or 134.80.
Depending on the what the BoJ policy minutes report, it is likely the Japanese central bank will continue with, and increase, the massive quantitative easing program given that economic data is showing a slowing down of sorts, although positive. November’s GDP showed a gain of .5 percent versus the previous quarter’s gain of .8 percent.
This would further propel the EURJPY higher. A break and close above the highs would send the pair into wide open spaces. The weekly chart is showing price action trending up into a channel with currently price action at resistance. A break above these levels would suggest a shot up to 139, levels not seen in five years.