EUR/JPY has hit lows of 130.56 during the day and has recovered slightly to currently trade at 130.92. Deeper losses in EUR/JPY likely in the days ahead. We recommend fading rallies.
Better-than-expected German and EZ PMIs released earlier largely ignored by the EUR bulls, who wait on the sidelines on fears of more ECB easing.
The anticipated quantitative easing expansion by ECB will weigh on EUR taking the pair lower. Risk is for eventual losses upto 129.30 - 78.6 % Fibo of 126.08-141.06 rise.
There is a risk of intra-day squeeze higher. An hourly close above 130.97 will lead to a stronger recovery (130.97 is 23.6% retrace of the 132.26-130.57 - fall).
Daily Stochs and are at oversold, some unwinding from lows likely in the near-term, immediate resistance is seen at 131.30 (5 DMA), while support is located at 130.57 (Session Low Nov 23).
We would be looking to fade recovery attempts in the pair around 131.50, place stops at 132.0, TP: 129.40
R1: 131.30 (5 DMA)
R2: 131.93 (Daily High Nov 20)
R3: 132.26 (Daily High Nov 19)
R4: 132.59 (Daily High Nov 13)
S1: 130.57 (Session Low Nov 23)
S2: 130.28 (Daily Low Apr 29)
S3: 130.00 (Psychological Level)
S4: 129.30 (78.6 % of 126.08-141.06)