EUR/JPY Technical Analysis: Confluence Awaits at the 120.00 'Decision Level'
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- EUR/JPY Technical Strategy: Near-term bullish with fresh 5-month highs.
- EUR/JPY has run into the 76.4% retracement of the Brexit move, but a more pertinent resistance level looms just a bit higher on the chart.
- If you’re looking for trading ideas, check out our Trading Guides.
In our last article, we looked at the prospect of a new bullish trend in EUR/JPY as the pair surged to fresh three-month-highs, bursting above a previously strong zone of resistance around the 116.37 level.
And since that last article, Yen weakness has continued in a very big way; leading to significant top-side breaks in many Yen-pairings such as USD/JPY, GBP/JPY and of course, EUR/JPY. Of those three, the move in EUR/JPY may be the most vulnerable, as the potential for an extension of European QE out of the ECB can carry the potential to drive the Euro-weaker in the weeks ahead. If we combine this with a series of resistance levels sitting just above price action, and traders would likely want to move forward on continuation moves with a heavy amount of caution. For those looking to trade in Yen-weakness, more attractive venues may be seen in pairs with base currencies carrying lessened ‘QE-risk’, such as AUD/JPY or the aforementioned USD/JPY or even GBP/JPY.
A big ‘decision level’ on the pair can be seen at the psychological level of 120. This level is significant because not only is it a round-figure on the pair, but it’s also just 10 pips away from the 61.8% Fibonacci retracement of the 16-year major move in EUR/JPY. Traders that are looking to stage top-side approaches would likely want to let this level first break to prove that bulls might be able to continue pushing the move-higher. Should that take place, traders can then use this potential level of resistance to try to find that ‘higher-low’ of the continuation move.
Chart prepared by James Stanley
--- Written by James Stanley, Analyst for DailyFX.com
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