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EUR/JPY Targeting Key Support Ahead of ECB

EUR/JPY Targeting Key Support Ahead of ECB

2016-10-19 19:09:00
Michael Boutros, Strategist
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Talking Points

  • EUR/JPY approaching key support confluence ahead of ECB
  • Short-bias at risk above 112.26
  • Updated targets & invalidation levels

EUR/JPY Daily

EUR/JPY Daily Chart

Chart Created Using TradingView

Technical Outlook: EURJPY has been in consolidation since the June 24th Brexit sell-off with the pair now eyeing key confluence support after reversing off yearly trendline resistance earlier in the month. The support zone extends into the September low-day close at 112.26- a break below this key region shifts the focus to the July low at 110.82 and the 2016 low at 109.21.

Heading into tomorrow’s highly anticipated European Central Bank (ECB) rate decision, the short-bias is at risk as the pair approaches this support zone with key resistance eyed back at the 2016 trendline which converges on the 100-day moving average around 115.05/10. A close above 116.03 would be needed to shift the broader focus back to the long-side.

EUR/JPY 120min

EUR/JPY 120min Chart

Notes: The pair has been following this embedded slope off the monthly high with the lower parallels highlighting near-term support at 112.98 and 112.60- both areas of interest for exhaustion / possible long-entries. A break below 112.26 keeps the short-bias in focus.

Interim resistance now stands at the monthly open / 61.8% retracement at 113.63/68backed by 114.18 and the upper parallels which converge on the weekly open at 114.46 (near-term bearish invalidation). From a trading standpoint, I would be looking for a reaction down at structural support with a breach of this near-term formation targeting subsequent topside objectives at 115.05 & trendline resistance extending off the July high currently ~115.75. For the complete setup and to continue tracking this trade & more throughout the week- Subscribe to SB Trade Desk.

EUR/JPY Targeting Key Support Ahead of ECB
  • A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net longEURJPY- the ratio stands at +1.03 (51% of traders are long)- weak bearish reading
  • Long positions are 30.0% above levels seen last week while short positions are 8.1% lower over the same time period.
  • Open interest remains lackluster at 7.1% below its monthly average
  • Note that SSI reached an extreme of 1.6 on September 21st as the exchange rate was registering a low. I would be looking for a build in long-positioning as the pair approaches support with such a scenario risking a near-term exhaustion low.

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Relevant Data Releases This Week

EUR/JPY Targeting Key Support Ahead of ECB

Other Setups in Play:

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

Follow Michaelon Twitter @MBForex contact him at mboutros@dailyfx.com or Click Here to be added to his email distribution list

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