- EUR/JPY remained volatile after a surprise decline in the German inflation data.
- The cross is looking to negate the Inverted Flag formation.
- A bullish range shift by the RSI (14) favors an upside momentum.
The EUR/JPY pair has corrected marginally after testing Thursday’s high around 141.35 in the early Tokyo session. The cross displayed sheer volatility on Thursday after the release of the German inflation data.
The German inflation data decelerated to 9.2%, surprisingly from the consensus of 10.0% and the former release of 9.6%. Although Eurozone inflation is showing the negative impact of higher interest rates by the European Central Bank (ECB), the price index is still extremely far from the required target. Therefore, more interest rate hikes by ECB President Christine Lagarde cannot be ruled out.
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Meanwhile, investors are still awaiting nominations for Bank of Japan (BoJ) Governor Haruhiko Kuroda’s successor for further guidance over the Japanese Yen.
EUR/JPY is an inventory adjustment phase above 141.00 and is aiming to negate the Inverted Flag formation on an hourly scale. The chart pattern indicates a sheer consolidation that is followed by a breakdown. Usually, the consolidation phase of the chart pattern serves as an inventory adjustment in which those participants initiate shorts, which prefer to enter an auction after the establishment of a bearish bias.
The cross has scaled above the 20-period Exponential Moving Average (EMA) at 141.04, which indicates that the short-term trend has turned bullish.
Meanwhile, the Relative Strength Index (RSI) (14) has climbed into the bullish range of 60.00-80.00. A continuous oscillation in the same will trigger an upside momentum.
For an upside move, the cross needs to surpass January 25 high at 142.29 for an upside move, which will drive the asset toward January 11 high at 142.61 followed by October 24 low at 143.72.
Alternatively, a break below February 7 low around 140.30 will drag the asset toward January 17 high at 139.62 and January 13 low around 138.00.
EUR/JPY hourly chart