Price & Time: EUR/JPY - Flirting With Cyclical Breakdown

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Talking Points

• EUR/JPY meandering around key Fibo
• Last week’s low in the cross a key pivot

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EUR/JPY: Flirting With Cyclical Breakdown

I wrote last week about EUR/JPY and the confluence of timing relationships converging then. Some of these relationships included the 38% retracement of the time elapsed between the 2012 low and the 2014 high, the 161.8% retracement of the time between the 2014 high and the year-to-date low and the 100% extension in time of this year’s July and September lows. Following the low made last Friday (during the turn window) the cross has not done much of anything as it continues meander around the 61.8% retracement of the April - June range. I still think we get a strong move from here in the cross, I am just torn on which direction.

Last week’s 131.47 low is critical. If that was some sort of important medium-term cyclical low then it needs to hold and in fact it has. Yesterday there was a downside retest in EUR/JPY, but it couldn’t break under 131.47. This is clearly a positive. What I don’t like about the price action is the tepid nature of advance attempts this week. If the cross is indeed recovering from some sort of price/time square out then I would expect advances to be a little more dynamic than they have been. A move through this week’s high is desperately needed to instill some sort of upside momentum into the rate as it would it would also trigger a minor double bottom. The flipside is we get a break of 131.47. This would invalidate the positive timing aspect from last week and signal a likely resumption of the downtrend in place since June.

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter @KKerrFX