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Talking Points:
- EUR/JPY Technical Strategy: Flat
- EUR/JPY continues working a new up-trend, setting higher-low support off of a key level.
- Renewed Japanese Intervention hopes could continue adding pressure on the Yen to further confirm up-trend.
After five consecutive days of gains last week, EUR/JPY faced selling pressure on Monday and Tuesday as buyers tightened up risk ahead of FOMC on Thursday. But a key support level has come into play that may be helping the pair carve out a higher-low, which could be accommodative for upcoming long positions.
The price in question is the 135 level on EUR/JPY, and this has been a price that’s seen considerable price action as both support and resistance over the past 15 years in the pair. This is a psychological level as it’s an even-rounded number that will often illicit new buyers or sellers into the market, but it’s also just 13 pips away from the 38.2% Fibonacci retracement of the ‘secondary move’ in the pair (shown in black on the below chart - taking the 2014 high and the 2015 low). And with now two days of support off of this zone, long positions could be attractive provided that an amenable risk-to-reward ratio is available. Traders could look to place stops below 135, and perhaps even just below the 134.81 level (which is the 38.2% retracement of the most recent major move, taking the August high to the September low). This would necessitate 130-140 pips of risk using current market prices; but targets could be daunting as a projected trend-line looms above price action, and numerous levels of resistance stand within 130 pips of current price. No entry will be taken until a more attractive risk-reward ratio may be made available.
Alternatively, continued resistance below 137 could re-ignite the bearish posture in the pair, at which point short positions become more attractive with targets cast towards that 135 support level, and then 134.81, followed by 133.82 (23.6% of the most recent major move).
Written by James Stanley of DailyFX; you can join his distribution list with this link, and you can converse with him over Twitter @JStanleyFX.
