The EUR/JPY is moving sideways amid volatile declines in majors
The EUR/JPY currency pair has remained somewhat quiet today after a broad rally of the U.S. dollar on Friday set in motion massive liquidations in long positions in EUR/USD and GBP/USD. The USD/JPY has not remained unscathed as the USD continued marching higher and reached a high of 113.95 as of writing.
The EUR/JPY pair has remained under pressure from both buyers and sellers, looking for a direction in a rather quiet trade on Friday. While the U.S. dollar has been rallying across the board in the aftermath of bullish data about spending and inflation, the Japanese yen has remained on the back foot.
The higher inflation numbers have also sparked bets that the U.S. economy remains on a solid footing and that the contractionary signs seen from earlier this month are merely a reflection of a soft patch in the past. Both consumption and personal income are valuable metrics for risk sentiment, which is a factor in the EUR/JPY pair.
Looking at the factors driving the Japanese yen we can not overlook the massive underperformance of the pair in times of a rally in risk assets such as stocks and oil. With both brent and WTI crude oil contracts rallying substantially in recent days, the Japanese yen has lost its luster.
How to trade
Looking at the chart we have identified a key support level around 124.22. This is the blue trend line on the chart attached to this forecast. We would be buying daily and hourly calls if the pair touches that level with an expiration set before today's market close.
Only a sustained break below 124.20 would invalidate our call and would prompt us to reverse our call and start buying daily put options.