The EURJPY currency pair has reached a critical high point, following European data showing signs of economic weakness. The Euro Area Retail Sales Year-on-Year came in lower than consensus, -2.3% vs -1.8%, respectively, showing signs of weakness in consumer demand.  

With Japan and the Euro Area battling inflation well over their targets, the European Central Bank is highly committed to bringing inflation back within target, despite signs of weakening economic data. On the other hand, Japan is battling inflation with negative interest rates, fueling inflation as low borrowing costs promote consumer spending. Traders will look to Friday’s interest rate decision by the Bank of Japan for signs of Japan’s reaction to record high inflation.  

Technical 

The EURJPY has been in a steep uptrend, with the most recent support and resistance forged at the 144.444 and 145.374 levels, respectively.  

Following a bullish push, price approached the resistance level on declining volumes. Bulls are probably tiring out at the 145.374 level, which has been rejected twice before. If bears enter the market, the EURJPY will likely be lowered towards the 144.444 level. 

Alternatively, if bullish momentum fails to subside at present levels, a breakout above the 145.374 level on high volumes could validate a potential upward movement. The 145.603 Fibonacci Extension level is probable if the currency pair moves higher.  

Summary 

Given that the Euro Area is revealing signs of weakness and the EURJPY is at a critical resistance point, the currency pair will likely find some downside price action in the short term. The 144.444 level is a likely point of interest for downside participants.  

Sources: Reuters, TradingView