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EUR/JPY Technical Analysis:  Short Position Setting Up

EUR/JPY Technical Analysis: Short Position Setting Up

James Stanley, Senior Strategist

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Talking Points:

  • EURJPY Technical Strategy: Flat
  • EURJPY puts in its fourth consecutive day of gains after establishing a new near-term low
  • Resistance below 137 as confirmed by an extended 4-hour (or daily) candlestick wick could provide short entry opportunity.

Yen weakness has continued as a pervasive theme as the financial world has taken a step back from the cliffs of panic. Since bottoming just above the 132 support level last week, EUR/JPY has ripped higher by almost 400 pips, showing very little sign of resistance as sellers yielded to rampant demand.

But the outsized down-trend that began towards the end of August as Chinese equity weakness began to spill out to the rest of the world provides a bearish tone for the pair that could make short setups attractive in the coming days should resistance come in south of the 137 level (the higher-low before the previous up-trend came to an end).

Resistance at 136.40 could be particularly interesting, as this is the 61.8% retracement of the most recent ‘panic move.’ For now, the threat of continued strength in the pair is enough to give caution to short sellers.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.