EUR/JPY Price Analysis: Stuck around 136.50-138.00

• Market sentiment is positive, although it is worth noting that China’s battle against Covid-19 could outweigh risk appetite and change sentiment negatively.
• EUR/JPY Price Forecast: Head-Shoulders Pattern Dim Prospects for EUR Higher.

The EUR/JPY it remains stuck in the 136.50-138.00 range for the third consecutive trading session, although it breaks two successive losing days and prints decent 0.19% gains in the American session. At 137.01, the EUR/JPY reflects a positive market sentiment in general.

Global stocks rose on Tuesday, while bond yields rose, with the exception of US Treasuries. In the commodities segment, precious metals rise and crude oil falls. China remains under pressure as the Covid-19 outbreak lasts longer than anticipated as authorities in Shanghai may reinstate stricter measures again. Additionally, Fitch Rating cut China’s growth outlook to 4.3% from 4.8% amid Beijing’s zero-tolerance program.

Meanwhile, EUR/JPY remains capped by action from higher EUR/USD, which remains confined to the 1.0500-70 range ahead of a crucial Fed policy meeting.

EUR/JPY Price Forecast: Technical Outlook

EUR/JPY continues to be threatened by a head and shoulders chart pattern on the daily chart. Although it could be invalidated, once EUR/JPY breaks above 140.00, that scenario is unlikely as central banks linked to them remain dovish. Additionally, the JPY’s presence in the cross leaves it subject to market sentiment, which could send the pair lower if it turns negative.

That said, the first support for the EUR/JPY would be the 137.00 level. If the EUR/JPY bears break that level, that will expose the 136.00 figure, followed by the head and shoulders neckline around 135.00-20.

Technical levels