EUR/JPY Price Analysis: Tumbled after squeezing longs, on failed breakout around 142.00

• The EUR/JPY extends its losses during the week by 1.37%.
• EU recession fears and risk aversion are a headwind for the EUR/JPY.
• EUR/JPY Tuesday’s price action opened the door for a corrective pullback towards 140.60s before resuming downwards.

The EUR/JPY refreshes three-week lows below the 139.00 mark, for the first time since June 16, amidst a mixed market mood, which later progressed as US equities erased earlier losses. At the time of writing, the EUR/JPY is trading at 139.11.

EU recession fears, a headwind for the EUR/JPY

Futures of Asian stocks prepare to open mixed, carrying on Wall Street’s mood. Fears of a worldwide recession amidst inflation at around 40-year high levels spurred a flight to safety. Safe-haven peers, like the Japanese yen, got bolstered by the previously mentioned. Contrarily a gloomy economic outlook in the EU was a headwind for the EUR/JPY.

The EUR/JPY, Tuesday open, was near the Monday highs, followed by a rally towards the 200-H1 simple moving average (SMA) at around 142.35. However, once the cross approached that price level, sellers stepped in and sent the EUR/JPY nosediving towards the daily low around 138.94, reached late in the North American session.

EUR/JPY Daily chart

On the Monday analysis, I wrote that “EUR/JPY traders should note that albeit a bullish harami has formed, sellers begin to mount around 142.00, which might send the cross-currency pair tumbling toward the July 1 low at 139.80.” During the Tuesday session, the EUR/JPY achieved the target mentioned previously as sellers piled around the 200-H1 SMA, sending the pair tumbling beyond the July 1 low. Nevertheless, the magnitude of the fall opened the door for a corrective pullback, at least a 50% retracement towards 140.65, before resuming the ongoing downtrend.

If that scenario plays out, the EUR/JPY first support would be 140.00. The break below will expose the 50-day EMA at 138.96, followed by the June 16 daily low at around 137.83.

EUR/JPY Key Technical Levels