EURJPY Resistance Turned Support (Aug 19, 2015)

From there, the pair retreated to test the broken resistance near the 50% Fibonacci retracement level.

Stochastic is already indicating oversold conditions and is starting to climb, suggesting that a bounce is in order. RSI is also pulling up from the oversold region and reflecting a pickup in bullish momentum.

The 100 SMA also appears to be holding as support, although a larger pullback to the 61.8% Fib or 136.50 level near the 200 SMA might still be possible. With the short-term SMA above the long-term SMA, the path of least resistance is to the upside so the pair might move back to test the previous highs at the 138.90 level.

Event risks for this trade include the Greek bailout talks, as Germany recently said that they are willing to give debt relief as long as the IMF is on board. Note that Greece has a loan obligation to the ECB this week and failing to meet this payment could mean more losses for the euro.

However, if all goes well and the IMF decides to give more cash to Greece, the euro could be in for a strong rally. There have been no major reports out of Japan yesterday but previous releases have reflected weaknesses in exports, investment, and consumer spending. Earlier today, the medium-tier trade balance release indicated a wider than expected trade deficit of 0.37T JPY versus the projected 0.16T JPY shortfall.

The FOMC minutes could have a material impact on overall market sentiment today, as increased risk appetite could spur gains for EURJPY as well. On the other hand, downbeat remarks on the global economy could spark a flight to safety and lead to gains for the lower-yielding Japanese yen.

By Kate Curtis from Trader's Way