Forex: EUR/JPY Technical Analysis – Opting to Skip Long Trade Setup
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- EUR/JPY Technical Strategy: Flat
- Support: 140.91 (trend line), 140.44 (Mar 14 low)
- Resistance: 142.22 (23.6% Fib exp.), 143.32 (38.2% Fib exp.)
The Euro may be readying to turn higher against the Japanese Yen after an expected pullback as prices show a Bullish Engulfing candlestick pattern above support at a rising trend line set from early February. The first layer of resistance is lines up at 142.22, 23.6% Fibonacci expansion. A break above this barrier exposes the 38.2% level at 143.32. Trend line support is now at 140.91, followed by the March 14 low at 140.44.
A 20-day ATR reading of 123 pips and an initial target at 142.22 implies a long entry price no higher than 140.99 is required to maintain 1:1 risk/reward parameters if a stop-loss triggered on a daily closing basis is to be used (as is the case with our strategy). That means current prices are too close to resistance to justify a trade. Furthermore, prices are showing a correlation reading of 0.70 with the US 10-year Treasury yield (on 20-day percent change studies). This hints at high sensitivity tomorrow’s FOMC policy announcement and we prefer to allow event risk to pass before committing to a position.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.