FxWirePro: EUR/JPY erases early gains, extends weakness ahead of German IFO Expectations Index

EUR/JPY chart - Trading View 

EUR/JPY has erased early gains and has slipped lower from session highs at 117.55 and was trading at 117.13 at around 06:35 GMT.

The pair is extending weakness for the 3rd straight session after rejection at daily cloud and 110-EMA resistance.

Markets await forward-looking German IFO Expectations Index (May), scheduled for release at 08:00 GMT.

The index is forecasted to tick higher to 75 from April's reading of 69.4. If the index rises more-than-expected, the single currency will likely change course.

That said, lingering US-China tensions will keep lid on gains. China's foreign minister, on Sunday, accused Washington of damaging the relationship with Beijing and pushing the two nations toward a “new cold war”.

EUR/JPY could continue to lose altitude in the short-term. Technical indicators are poised for reversal.

Recovery capped at daily cloud and 110-EMA. RSI is biased lower and Stochs are on verge of reversal from overbought levels. 

Price action has slipped below 55-EMA and is on track to test 21-EMA at 116.80. Break below will confirm further weakness.

Support levels - 116.80 (21-EMA), 116, 115.26 (78.6% Fib)

Resistance levels - 117.44 (55-EMA), 117.57 (5-DMA), 118.39 (110-EMA)