EUR/JPY at a critical price juncture ahead of German economic data

EUR/JPY has risen to bump up against major resistance just above 115.00 and on the underside of a key descending trend line extending back to the late January highs. The currency pair has been rising rather sharply since late September as the euro has generally been well-supported and the safe-haven yen has been in pullback mode on recently increased risk appetite in the markets.

Tuesday morning brings key economic data from Germany in the form of the German ZEW survey. This release is a leading indicator of economic sentiment in Germany, and can often result in moves for the euro. The past three months of survey results have been consistently more pessimistic than expected.

As it currently stands from a technical perspective, EUR/JPY is consolidating in a potentially bullish flag pattern on a short-term basis, but still within a longer-term downtrend as outlined by the noted descending trend line. Any breakout of the short-term flag pattern would also result in a breakout above the longer-term downtrend line.

More likely, however, the euro should continue to be weighed down due to the ongoing dovish stance of the European Central Bank, and the yen may very well continue to strengthen on near-future risk events after the current pullback plays out. In this scenario, EUR/JPY would retreat from the current resistance area and continue to fall in line with the downtrend that has been in place since mid-2015. In the event of such a retreat from resistance, the next major downside target is at the key 112.00 support level.

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