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EURJPY Rebound to Offer Short Entries Ahead of ECB- 137.50 Critical

EURJPY Rebound to Offer Short Entries Ahead of ECB- 137.50 Critical

Michael Boutros,

Talking Points


Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • EURJPY testing key support confluence at 135.32- risk for near-term rebound above this mark
  • Resistance at 200DMA backed by 134.49 (reversal day close & bearish invalidation)
  • Breach above ML resistance / 138.83 needed to shift broader bias to the topside
  • Break targets support objectives into the 133.10/56 barrier
  • Daily RSI hold sub-60 / support trigger break- bearish
  • Momentum break sub-40 would suggest broader decline is underway (last time was April)
  • Event Risk Ahead: Japan CPI & Retail Sales tonight and ECB Constancio speech at Jackson Hole, German CPI tomorrow

EURJPY 30min

Notes: EURJPY has come into key near-term support at 135.32/48 with momentum divergence into a resistance-trigger break shifting the immediate focus higher. Interim resistance stands at 136.47 & 137.12 with our bearish invalidation level set at 137.50/55. Note that the slope of the descending trendline off the weekly highs has defined the past few corrections with great precision and as such, we’ll be looking for possible short exposure into that region. Keep in mind that we’re simply playing the rebound for now with the rally likely to offer more favorable short entries.

Bottom line: while the immediate bias has shifted to the topside, we’ll be looking for short triggers sub-137.50/55 with a break of the lows targeting the monthly opening range low at 134.98, the 78.6% retracement at 134.52 & the key support barrier at 133.10/56. A quarter of the daily average true range (ATR) yields profit objectives of 31-33 pips per scalp. Caution is warranted heading into the end of the week/month with event risk out of Japan tonight & Germany tomorrow likely to fuel added volatility in yen & sterling crosses. Key event risk mounts next week with the ECB interest rate decision on Thursday.

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Relevant Data Releases

Other Setups in Play:

---Written by Michael Boutros, Currency Strategist with DailyFX

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.