EUR/JPY has bullish sentiment signal, but keep an eye on big support

EUR/JPY remains favored for higher prices based on sentiment signal, but only as long as key support remains intact.

EUR/JPY sentiment, price, and analysis

  • EUR/JPY client positioning remains in favor of a rally
  • Big price support is key to maintaining a bullish stance

The euro remains pointed higher versus the Japanese yen from both a sentiment and technical standpoint. There are a couple of things traders can watch to determine if this will remain, or the bias will shift to the downside.

EUR/JPY IG client sentiment

EUR/JPY retail trader data shows 42.29% of traders are net-long with the ratio of traders short to long at 1.36 to 1. Taking a contrarian viewpoint, it suggests that with nearly 58% of retail betting against a further advance that we will see the cross continue to rise. However, if we see a sudden change of direction in price below support (discussed below) coupled with a sizable surge in buying, this could signal that a larger decline may get underway.

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EUR/JPY IGCS chart

EUR/JPY technical outlook

This far, adding to a bullish sentiment bias is strong price action since hitting support around the ¥12,440 mark. This is a big level of support to watch as it has several inflection points; the June high along with a couple of holds as support in August. This week’s test further cements its importance moving forward.

Looking higher there is a decent amount of resistance that could challenge a bullish outlook, though. Th recent highs last month and this month in the vicinity ¥12,675/¥12,705 could prove difficult. An advance through there will find EUR/JPY in a face-off with a big trend-line from 2014 that crosses over the 2018 peak. This will be an interesting intersection to watch. A breakout through could find the pair with room into the ¥13,000s, but a turn down may again have big support in focus around ¥12,440.

All-in-all, we continue to give the near-term strength the benefit of the doubt between support holding and the sentiment outlook, but that bias could change with a break of support and shift in retail positioning.

EUR/JPY daily chart

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