EUR/JPY: a bearish trade for the month ahead, target key 128.72?

Currently, EUR/JPY is trading at 129.67, down -0.69% on the day, having posted a daily high at 130.67 and low at 129.65.

EUR/JPY continues to develop into a bearish trade for the month of September. The cross started to sell off during the release of nonfarm payrolls when Bloomberg sited ominous spokesmen from the ECB who tipped the market off when saying there will not be any announcements made in respect to timings of tapering QE. The news from the weekend sparked a risk-off theme to the start of this week with N.Korea stepping up the ante and testing a nuclear bomb. 

ECB: 4 things to watch - ING

"We are convinced the ECB will extend its purchases. One principle that seems inviolable is that there cannot be a hard stop. The purchases must be tapered. We are most confident that the purchases will be extended into next year," explained analysts at Brown Brothers Harriman, adding, "The key issues are when does the ECB make the announcement and how much to taper. We had been looking for an announcement this week of the amount and duration of the extension.  However, the flurry of comments suggests that the ECB may look to push the announcement out until the next meeting."

EUR/JPY levels

"We suspect the formation developing is a possible megaphone top," analysts at Commerzbank explained, suggesting that these are a nightmare to trade. "Marginal new highs are not sustained and the market swings sharply back into the range - attention is on the 20 day moving average, now at 128.72. Below 128.69 would target the 125.57 August low," the analysts added.