EUR/JPY: a phase of consolidation around 131.50 before 130.70?

• EUR/JPY: the euro and dollar are at critical levels while the yen defends 110.00.
• EUR/JPY:  130.70 is the immediate downside target, 131.50's holding for now.

EUR/JPY has been changing hands below the 200-D SMA at 131.65 while the euro continues to fall and as stocks struggle to gain traction. Currently, EUR/JPY is trading at 131.48, down -0.24% on the day, having posted a daily high at 132.14 and low at 131.43.

EUR/JPY has been in a steady correction of last Feb's rally from 128.94 that reached a high of 133.48 at the end of April and the has crossed a crucial level here. The reflation trade is being unwound and the dollar is picking up plenty of demand and is progressing through the 92 handle quickly, (heavily weighted to the euro).

Key levels being tested

The euro is still carrying plenty of speculative longs so there could well be some more downside to go below the 200-D SMA yet. On the yen leg of the cross, geopolitical tensions are simmering away in the background preventing a full-on break through 110 the figure vs the greenback and stocks are consolidating at key levels on the daily sticks. 

EUR/JPY levels

Analysts at Commerzbank explained that EUR/JPY continues to ease lower following its recent failure at the top of the cloud at 133.24. "The market has eroded its near term uptrend and we would allow for a slide to the base of the cloud, currently at 130.70. Initial support is the 55 day ma at 131.54. Beyond this near term correction lower we should see gains to the 134.18/61.8% retracement."