2) EURJPY

Technical Analysis (MA, RSI, STOCH, MACD, ADX)

• M30 - DOWN
• H1 - DOWN
• H4 - RANGE
• D1 - UP
• W1 - UP
• MN - UP

• Resistance: 131.30, 131.85, 132.40
• Support: 128.50, 128.30, 128.00

The currency pair continued the upward momentum started earlier yesterday, and there was some hovering at the strong resistance level of 130.50, but the pair broke through it, and the next level of 131.30 has stopped the pair so far. Even despite the growing demand for safe-heaven, the pair is trading with an upward potential, against the background of the weakness of the Japanese Yen. The value of the Fear-Greed indicator decreased to 32 as a result of yesterday.

Now the pair's growth is slowing down slightly against the background of increased fear, and the JPY is a traditional safe-heaven currency. Now, concerns about faster-than-expected inflation growth and a slowdown in the global economic recovery are reinforcing concerns about stagflation. Also, increasingly, news from China is causing concern.
Chinese developer Evergrande missed the third consecutive bond payment in recent weeks, which increased the risk of a repeat default. In addition, the Chinese developer Modern Land announced the postponement of payments for three months, and the construction company Sinic Holdings warned of a possible default next week. Also, do not forget about the situation with another Chinese giant Fantasia Holdings Group. According to Bank of America, approximately 40% of Chinese construction companies that borrowed from foreign investors are at risk of bankruptcy. The fact is that in recent years, Chinese developers have not focused on demand, but have been more engaged in speculation. It is clear that in the event of their default, the whole world will feel the negative consequences, of course not as harshly as in 2008 with Lehman Brothers.

On the other hand, the news and analysis of the merged secret Chinese papers are often flashing in the media now. China is preparing for a possible large-scale outbreak of COVID-19, this is stated in government documents that fell into the hands of Epoch Times journalists. According to leaked internal documents obtained by the Chinese Epoch Times, the Chinese government has notified local authorities of the need to prepare for a large-scale COVID-19 outbreak.

All this is likely to lead to additional demand for protection, including the demand for JPY. Since the second half of yesterday, we have been noting a decline in the Nikkei 225 stock index.

Neither Japan nor the EU published anything important yesterday. The only thing we want to pay attention to is the dovish position of F. Lane. Yesterday, ECB Chief Economist Philip Lane said that the conditions for the ECB's response to rising inflation have not yet been achieved, he also added that the ECB is now in the process of recalibrating, and not curtailing the emergency stimulus of PEPP.

There is practically no important news on the pair ahead. So far, we are monitoring the resistance level of 131.80, as the pair has apparently completed a downward correction (in the area of 128.00 = 61.8%) from the last upward impulse (January-May 2021) within the framework of the upward trend of May 2020. By the breakdown of the level of 131.80 = 23.6% of the pair will fully return to the uptrend.

Short-term forecasts for the pair have not changed and are reduced to monitoring the market phase, if there is an impulse to abandon risks, the pair will fall down. There are enough risks in the market. However, when the situation normalizes, the fundamental assessment indicates an exclusively upward movement, which is supported by macroeconomic data from the EU and Japan, as well as the EU's success in recovering from COVID is years ahead of Japan. Plus the position of the BoJ, which was recognized as a currency manipulator.

In other words, the downward movement is supported only by the rejection of risk. In any case, the support level of 128.00 is still a reversal.

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