Early in Asia, the Japanese yen traded modestly lower against most of its major trading partners. Over the weekend, the Yomiuri poll showed that the majority of Japan public supports a sales tax hike delay. Also, approval ratings for Prime Minister Shinzo Abe’s cabinet rose 1% to 50%, while the disapproval rating fell a couple points to 38%.
Other Japanese news saw the BoJ Tankan survey companies saw inflation now at 0.8%, lower than the prior 1.0% reading from the prior survey. The 3-year inflation outlook survey was lowered to 1.3% from 1.3%.
Price action on the EUR/JPY shows the bearish trend resumed on Thursday after forming a potential a bearish Gartley pattern. The bearish reversal pattern targeted point D slightly ahead of the 61.8% Fibonacci retracement level of the X to A leg and the 141.4% Fibonacci expansion level of the B to C move. Further downward pressure may target the 50-day SMA, which currently trades at the 126.78 level. Deeper support could target the 124.75 level. If we do not see a substantial reversal here, further upside may target the psychological 129.00 handle.
The trade: Sell EUR/JPY 127.50 with a stop loss at 128.00 and a take profit at 125.50. The Risk/Reward Ratio is 1:4.