$EURJPY gets hurt as risk aversion sets in with stock market declines

The decline in European stock markets are hurting the risk currency pairs including the EURJPY. Stocks are getting hurt on the back of banking worries after the government of Dubai said it would ask to postpone debt of its corporate flagship Dubai World (the man made oasis Nakheel may be the epitome of excess).  The news has brought into focus the added exposure to the region by banks which was thought to be bullet proof not long ago, but may in fact be another bubble that is close to bursting.  

This is the fundamental reason for the declines.  Of course those who follow our technical commentary would have been warned of the move lower after the price closed yesterday below the 200 day MA at the  132.34 level (or had a low risk trade opportunity that panned out).  The price of the EURJPY had closed between the narrowing 100 and 200 day MA for 8 straight days.  This consolidation is often a prelude to a break. Yesterday’s close below gave the clue. Today confirmed that bias with the sharp move to the downside. (For the setup from yesterday see: SEE PRIOR POST FRROM YESTERDAY)

Today the high reached a high of 132.31 in the first hour of trading before heading down.  The same technical clues were apparent throughout the move down that are often present on trend type moves.  One, the price and moving averages converged on the 5 minute chart indicating a non trend market.  Non trending transistions into trending and after testing the 100 and 200 bar moving averages, the price made a break to the downside (see chart above). The price consolidated in midday and tested the 100 bar moving average. At this point the market decided to resume the downside move.

The next target on the downside for the pair comes in at 129.02 which is the low from October 2009.  below that is the 38.2% retracement of the move higher at the 128.80 level (see chart below). Keep these levels in mind.

On the topside, the market may have some resistance at the 130.00 level but the fall has been so fast, the real resistance does not come in until the 130.40 level (which was the first low from earlier today). The 100 bar MA on the 5 minute chart does not come into focus until 130.48 currently and moving down.  Watch this moving average on corrective moves.