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EUR/JPY Technical Analysis: ’Decision Level’ is Now Support for Re-Entry

EUR/JPY Technical Analysis: ’Decision Level’ is Now Support for Re-Entry

James Stanley, Senior Strategist

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Talking Points:

  • EUR/JPY Technical Strategy: Bullish after breakout above the 120-level.
  • EUR/JPY has caught an aggressive bid, and is fast-moving towards the ‘Brexit swing-high’ at 122.00.
  • If you’re looking for trading ideas, check out our Trading Guides.

In our last article, we focused on has historically been a ‘big’ support or resistance level in EUR/JPY with 120.00. This level is, of course, a psychological level so it’ll have a tendency to produce swings and support/resistnace inflections. But this is also very-near the 61.8% Fibonacci retracement of the 16-year move in the pair, taking the low from October, 2000 to the highs of 2008.

Below, we look at the montly chart of EUR/JPY with this Fibonacci retracement applied; and notice how the 61.8% retracement at 119.91 caught the swing low in February/March of 2010, the swing-high of April/May 2011, and again with support in February, March and April of 2013 (each identified on the below chart).

Chart prepared by James Stanley

With price action just 100-pips away from that zone last week, we warned that resistance would likely show here, at least to some degree. And it did, albeit briefly, as this level had helped to set the high to close last week, and then again came-in as the high yesterday. But the bulls couldn’t be corralled for long: After resistance at 120.00 showed up, buyers came-in at prior support around the 118.50-level and have driven prices to fresh new highs with only a brief pause when re-approaching resistance at 120.00.

This opens the door to bullish continuation in EUR/JPY. Traders would likely want to take note of another major resistance level at 122.00, as this was the ‘Brexit swing-high,’ and is also the 50% Fibonacci retracement of the ‘Abe-momics’ move in EUR/JPY, taking the low from the year 2012 up to the high in 2014. This level was also support for three months ahead of the Brexit referendum, so this is a well-traveled level.

But this can be advantageous, as traders would likely want to wait for some element of resistance to soften prices in order to allow for top-side re-entries. With a level as critical as what 120.00 has historically been, this can be an ideal area to look for ‘higher-low’ support to develop now that we have the prospect of bullish continuation.

Chart prepared by James Stanley

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

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Contact and follow James on Twitter: @JStanleyFX

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

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