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EUR/JPY Technical Analysis: Another Test of Confluent Support

EUR/JPY Technical Analysis: Another Test of Confluent Support

James Stanley, Senior Strategist

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Talking Points:

  • EUR/JPY Technical Strategy: Long-term down-trend; near-term range-bound.
  • EUR/JPY saw a minimal movement off of support after our last article, only to return back to the same zone.
  • If you’re looking for trading ideas, check out our Trading Guides.

In our last article, we looked at EUR/JPY after the pair ran down to support after the September BoJ meeting. And as we wrote, this confluent zone of support had already seen multiple tests in the months leading up to that meeting, raising the possibility of a bigger-picture or longer-term reversal after the pair spent the better part of the previous 13-months in a vigorous downward-sloping channel (shown below).

Chart prepared by James Stanley

It’s the price action after the Brexit referendum that should be really compelling to EUR/JPY traders. Drawing a Fibonacci retracement on the Brexit range (high/low of June 24th) brings on a series of levels that have seen a considerable number of support/resistance inflections. Of relevance to near-term price action is the 23.6% retracement of that move at 112.25, which is confluent with another, longer-term Fibonacci level at 112.02, which is the 23.6% retracement of the ‘Financial Collapse move’ in EUR/JPY, taking the 2008 high to the 2012 low. But perhaps more relevant is the fact that this support has held the lows in EUR/JPY since mid-July after numerous tests of this zone.

As we looked at in our last article, this continued support can open the door to top-side plays. The targets in our last article were at 114.30, and traders can also incorporate the potential resistance zone at 115.00-115.37. Should rising prices take out the 115.37 level of resistance, the legitimate possibility exists of an extension of the move towards deeper resistance at 117.50, 119 and then 119.90, just shy of the next ‘big’ psychological level at 120.00.

Chart prepared by James Stanley

--- Written by James Stanley, Analyst for DailyFX.com

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

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