EUR/JPY trades in oversold area

The second half of Tuesday's trading session may be characterised by a consolidation phase, as EUR/JPY fluctuated around the 20-hour SMA and the weekly S1 at 123.39. Following news mid-day that the European Central Bank is to cut its inflation outlook due to weaker energy prices, the Euro experienced a strong momentum downwards that pushed the currency outside the lower Bollinger band. This indicator along with technical oscillators suggest that the pair is oversold and, thus, may be set for a reversal. However, it is yet to be seen if this motion upwards is just a short-term correction or the beginning of an intermediate wave north. The latter scenario would confirm a channel down. Thus, the rate should trade higher in this session; it may, however, be stalled once again by the 20-day SMA.