Forex: EUR/JPY Technical Analysis – Euro Recovery in the Cards?
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- EUR/JPY Technical Strategy: Flat
- Support: 136.22 (Feb 4 low)
- Resistance: 138.05-45 (channel bottom, 23.6% Fib ret.), 139.83 (38.2% Fib ret.)
The Euro may be gearing up for a larger recovery against the Japanese Yen, with prices showing a bullish Piercing Line candlestick pattern. A break above resistance in the 138.05-45 area, marked by the underside of a broken falling channel and the 23.6% Fibonacci retracement, initially targets the 38.2% level at 139.83. Near-term support is at 136.22, the February 4 low.
Maintaining at least a 1:1 risk/reward ratio calls for a long entry no higher than 137.13, meaning current positioning is acceptable from a purely mechanical standpoint. However, fundamental news-flow is a significant concern ahead of this week’s ECB policy announcement. The case for stimulus expansion (or a signaling thereof) appears compelling and we will opt not to be long the Euro in the interim.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com