EUR/JPY experienced a significant drop of almost 1% on Tuesday due to the strengthening of the yen following hawkish discussions that suggest the Bank of Japan may increase interest rates. This resulted in the pair breaking below the key support level of 170, reaching its lowest point in five weeks and breaching the 76.4% Fibonacci retracement level of the upleg from 167.52 to 175.42.
Looking at the technical analysis on the daily chart, the outlook has become even more bearish, especially with a daily close below the 170 handle reinforcing the negative sentiment. Bears are now targeting the significant support level at 169.00, which is the top of a thick rising daily cloud. A breakthrough of this cloud could pave the way for a full retracement of the bull-leg from 167.52 to 175.42.
On the other hand, bears may encounter resistance from the daily cloud, leading to a consolidation phase. The 170 level has now become a solid resistance level, expected to contain any bullish attempts. Beyond that, the next major barrier lies at 170.54, which coincides with the 55-day moving average and the broken 61.8% Fibonacci level.
Key levels to watch for resistance include 170.00, 170.54, 171.00, and 171.47, while support levels to monitor are 169.00, 168.00, 167.52, and 166.92.
It is important to note that the information provided in this analysis is based on reliable sources but should be used with caution as market conditions can change rapidly. Traders should stay informed of any developments that could impact the EUR/JPY pair and adjust their trading strategies accordingly.
