EURJPY Potential Breakout (May 03, 2017)

A breakout in either direction is possible, setting the tone for longer-term trends for this pair.

A move below the 122.30 wedge support could be enough to confirm that the pair is in for a selloff or perhaps a larger pullback from its ongoing climb. A break past the 122.65 wedge resistance could indicate that a steeper uptrend is underway.

The 100 SMA is above the longer-term 200 SMA on this 1-hour time frame so the path of least resistance is to the upside. However, stochastic is indicating overbought conditions, which means that euro bulls are tired. If the oscillator heads south, price could follow suit.

Economic data from the euro zone turned out mostly in line with expectations so far this week, and unemployment change reports from Germany and Spain are still lined up for today. However, traders could turn their focus to the second round of French elections on Sunday as polls are suggesting a narrowing lead for Macron and rallies are getting violent.

As for the yen, banks are closed for the holidays in the next couple of days so liquidity is expected to be low. Still, the pickup in risk appetite has proved bearish for the Japanese currency and changes to US bond yields could impact price action as well.

By Kate Curtis from Trader's Way