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The Euro may be readying to turn lower against the Japanese Yen, with prices showing a Bearish Engulfing candle setup and hinting at weakness ahead. Near-term support is at 138.06, the 23.6% Fibonacci expansion, with a break below that targeting the 38.2% level at 136.68. Resistance is at 140.29, the February 11 high.
A short position targeting 138.06 with a stop on a daily close above 140.29 is acceptable from a risk/reward perspective. We will opt to pass on the setup however. EUR/JPY is displaying a strong correlation with the S&P 500 (0.77 on 20-day percent change studies), pointing to a strong sensitivity to risk appetite trends. The benchmark stock index is in the midst of its strongest push higher in seven months and fighting that momentum seems ill-advised.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com