Will EUR/JPY hold above 132?

• Short-term momentum studies continue to favor the bears. 
• Better-than-expected Eurozone CPI could boost demand for the EUR. 

Having defended the 200-day moving average (MA) yesterday, the EUR/JPY pair is exploring upside above the downward sloping (biased bearish) 5-day moving average in Asia. 

As of writing, the pair is trading at 132.05 and the 5-day MA is seen at 131.79.  The cross looks set to test 200-hour MA of 132.15, courtesy of the bullish relative strength index divergence on the hourly chart, however, the short-term momentum studies - 5-day MA and 10-day MA are trending lower, indicating a bearish setup. So, the pair may find it hard to hold on to gains above the 5-day MA. 

That said, the previous two "long-tailed" daily candles signal bearish exhaustion around the 200-day MA (now seen at 131.21). Further, the EUR/JPY one-month 25 delta risk reversals (EUJP1MRR) show the volatility premium for puts (sell EUR) has dropped sharply in the last 15 days. Currently, the risk reversals are being paid at -1.95 EUR puts vs. -2.85 EUR puts on Feb. 12. Hence, the 200-day MA will cap the downside in the pair in the short-run. 

Focus on EZ CPI

Eurozone preliminary consumer price index (CPI) figure for February is due at 13:00 GMT. A better-than-expected figure could boost demand for the common currency and vice versa. The pair could also take cues from the broader market sentiment., i.e. risk-on action in the equities could keep EUR/JPY better bid. 

EUR/JPY Technical Levels

Acceptance above 132.15 (10-day MA) would open doors for a test of supply around 133.00 (zero figure) and 133.06 (Feb. 21 high). On the other hand, a failure to hold above the 5-day MA of 131.79 could yield a re-test of 131.21 (200-day MA) and 130.93 (Feb. 23 low).