EUR/JPY: hovers dangerously over the trend line resistance, grapples with the pivot ahead of key events

• EUR/JPY slipped above the trend line resistance and grapples with the 4hr pivot point at 128.97.
• EUR/JPY is higher due to Brexit and USD/JPY strength, stocks neither here nor there as we await the US Mid Terms.  
• EUR/JPY is trading outside of the descending channel after piercing the trendline resistance and now consolidates around the pivot point, taking cues from various factors such as Brexit and trade while traders get set for the outcome of Tuesday’s US mid-term elections.

EUR/JPY is correlated to the performance of global equities although US stocks today are relatively calm considering the lack of a catalyst as traders get set for the US mid-term election results that are due tomorrow. USD/JPY has managed to hold onto territory on the 113 handle which has given EUR/JPY a boost. The cross has also been riding the coattails of the performance of the pound due to Brexit deal sentiment. As for local data, the Eurozone Sentix Investor Confidence slipped to a 2-year low today, likely reflecting trade concerns etc. From Japan, markets are waiting for the BoJ to release minutes of its September policy meeting.  

Mid Term elections are the greatest risk event this week

The Mid Term elections are by far the greatest risk event this week, despite there being a number of key meetings between Central Bankers, including the FOMC and RBA. However, the Central Banks have been pretty clear in their intentions and the market is not expecting anything significant in the way of new information or indeed any changes to policy these meetings around. Instead, all ears will be to the ground for the results of the Mid Erm elections whereby the Democrats are tipped to take the house. This could upset and status quo as Trump’s agenda will have a hard time passing and disruptions there could be another catalyst for lower stocks, dollar and higher yen. In the same respect, the recent talks of a trade war truce, if found to be lacking substance or conviction, this is another area that could weigh on global equities and indeed the cross.  

EUR/JPY levels

Supply will send the cross back below the resistance and into the daily descending channel, with a target to the downside. 127.97 is the 50% retracement of the recent rally from the swing low. However, in order to restore upside pressure, rallies will need to regain the 130.20 22nd October high and preferably the 200-day ma at 130.30 (favoured), according to analysts at Commerzbank:  

“The 200 day moving average guards 133.13/48, the highs since April. Above 133.48 lies the 134.27 1979-2018 downtrend line. Still further up sit the 137.51 2018 high and the 137.87 2008-2018 resistance line.”