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In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend. The Japanese Yen has been outpacing the Euro for the past three weeks with EUR/JPY down more than 2.4% from the September high. The reversal is now approaching initial support hurdles early in the month and our focus is on two levels just lower to offer a reprieve to the recent sell-off. Here are the key targets & invalidation levels that matter on the EUR/JPY weekly chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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EUR/JPY Weekly Price Chart

EUR/JPY Price Chart - Weekly

Notes: EUR/JPY has been trading within the confines of these ascending slope lines extending off the July 2016 and 2017 lows with a parallel extending off the December 2016 highs capping the late September advance in price. The pullback is testing confluence support this week at ~129.36 where the March close-low converges on slope support and former trendline resistance extending off the early highs.

The focus is on a reaction off this mark. A break lower targets the 200-week moving average, currently near the 128-handle, backed by the yearly low-week close at 127.63- an area of interest for exhaustion / long-entries IF reached. Initial resistance stands with the 52-week moving average at ~131.30 (also the weekly opening range high) with a breach above the January trendline / 61.8% retracement at 132.58 needed to fuel the next leg higher in price.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Bottom line: EUR/JPY reversed from up-slope resistance last month with the pullback now testing the first support hurdle. From a trading standpoint, the risk does remain weighted to the downside but I’ll be looking for signs of exhaustion with 129.36 and 127.63 both areas of interest for a more significant recovery. Ultimately a topside breach would expose subsequent resistance objectives at 134.29 and yearly open at 135.16. I’ll publish an updated EUR/JPY scalp report once we get some further clarity on near-term price action.

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EUR/JPY Trader Sentiment

EUR/JPY Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-short EUR/JPY - the ratio stands at -1.36 (42.4% of traders are long) – weak bullish reading
  • Traders have remained net-short since August 23rd; price has moved 3.2% higher since then
  • Long positions are11.1% higher than yesterday and 58.5% higher from last week
  • Short positions are 3.1% higher than yesterday and 11.1% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/JPY prices may continue to rise. Yet traders are less net-short than yesterday & compared with last week and the recent changes in sentiment warn that the current EUR/JPY price trend may soon reverse lower despite the fact traders remain net-short.

See how shifts in EUR/JPY retail positioning are impacting trend- Learn more about sentiment!

Relevant EUR/JPY Data Releases

EUR/JPY Economic Calendar

Economic Calendar– for the latest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide!

Previous Weekly Technical Perspectives

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

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com