In news that essentially no one was surprised to hear, the US National Bureau of Economic Research officially declared that the US economy fell into recession in February this year, ending the longest-ever US economic expansion at 128 months. Traders, always the forward-looking bunch, have taken this news mostly in stride as they look ahead to the prospect of a potentially strong economic recovery, goosed by 13 figures ($10T+) of global stimulus measures.
In the FX market, EUR/JPY is the day’s biggest mover among the major currencies. After rising for nine straight days, the pair finally traded lower on Friday, forming a “shooting star” candlestick formation in the process. This pattern shows an intraday shift from buying to selling pressure and is often seen at near-term tops in the market. With rates falling sharply today, that near-term top has been confirmed, opening the door for a deeper retracement as we move through the week:
Source: TradingView, Gain Capital
From a purely technical perspective, the Fibonacci retracements of the May surge may be logical levels for EUR/JPY bears to target. In that vein, we’ll be keeping a close eye on 120.60 (the 38.2% Fibonacci retracement), 119.40 (50%) and 118.20 (61.8%) as potential downside objectives. Meanwhile, only a sharp bullish reversal and break above Friday’s high at 124.40 would erase the near-term bearish bias.