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EUR/JPY Technical Analysis: Big Level Plays, Now What?

EUR/JPY Technical Analysis: Big Level Plays, Now What?

2017-03-01 15:49:00
James Stanley, Strategist
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Talking Points:

In our last article, we looked at an interesting reaction in EUR/JPY as a longer-term support swing came into play around ¥118.50. This level had given a fairly aggressive series of bounces in late November/Early December, and a subsequent attempt to take-out this level last week was rebuffed by buyers. But as we warned, the down-side break of the prior range should not be treated lightly; and with such a big level in the mind of market participants at ¥118.50, another visit to this zone seemed highly-probabilistic.

Since then, we’ve seen another test of ¥118.50, with price action even driving a little below to set a new three-month low in the pair at ¥118.19. But buyers showed-up shortly thereafter and have begun to take control of the situation, as prices have now rallied up to resistance, breaking-above a down-ward sloping trend-line.

EUR/JPY Technical Analysis: Big Level Plays, Now What?

Chart prepared by James Stanley

Given the prior breach of support combined with the aggressive bullish price action that’s shown-up after-the-fact, and there is a legitimate prospect of top-side continuation plays. The primary issue with timing the long position at the moment is the fact that prices are sitting right on a major psychological level at ¥120.00, and this is coming after a strong break-higher. Bulls may want to wait for one of two things before investigating top-side continuation strategies.

Traders can utilize inside price action to look for top-side trend continuation by looking for a ‘higher-low’ to show-up around a prior level of interest. On the chart below, we look at three potential zones of support for such an approach.

EUR/JPY Technical Analysis: Big Level Plays, Now What?

Chart prepared by James Stanley

The down-side on waiting for a higher-low is that it may never show up. If excitement is really building in this theme, buyers may not allow for price action to drip down far enough to test support; so traders can also adopt ‘outside price action’ in the attempt of getting on the long-side of EUR/JPY. For such an approach, traders want to first wait for new highs to further iterate that bulls may be able to take control; and then prior levels of resistance can be watched for ‘higher-low’ support in the effort of trend continuation. On the chart below, we look at three potential levels to utilize for this type of approach.

EUR/JPY Technical Analysis: Big Level Plays, Now What?

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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