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EUR/JPY Technical Analysis: Pre-ECB Resistance Check

EUR/JPY Technical Analysis: Pre-ECB Resistance Check

2017-03-08 17:30:00
James Stanley, Currency Strategist
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Talking Points:

In our last article, we looked at an ebullient reaction off of a key zone of support in EUR/JPY around the ¥118.50 area. As we discussed, with a top-side break above a down-ward sloping trend-line combined with the bullish drive above the key psychological level of ¥120.00, the potential for a trend-shift was beginning to show in EUR/JPY.

Since then, we’ve seen price action work-higher towards a zone of resistance that had held in the pair for much of February. This is also a prior zone of support, further adding to the intrigue of using 121.00 for directional plays.

EUR/JPY Technical Analysis: Pre-ECB Resistance Check

Chart prepared by James Stanley

With the European Central Bank set to deliver another rate decision tomorrow, Euro-pairs could put in significant movement. This likely wouldn’t come from any change in rates, as little is expected there; but more likely on the prospect of Mr. Draghi alluding to the potential for further tapering of QE-outlays as European economic data has been showing signs of improvement.

Nonetheless – this is a major rate decision with a heavy potential for volatility given market sensitivity to fears of a ‘taper tantrum’. Mr. Draghi will likely be walking on eggshells: Markets will probably be looking for any innuendo they can grasp on to in the effort of getting a clue as to what Mr. Draghi and the ECB at-large are thinking.

For those that want to take-on long exposure in EUR/JPY, letting this zone of resistance first yield could make the prospect of continuation more attractive. There’s another, less pertinent zone of resistance between ¥121.65-¥121.96: Should this current zone of resistance around ¥121 give way, the deeper area of resistance could offer a short-term respite to price action, at which point the current area of resistance could then be re-assigned as support:

EUR/JPY Technical Analysis: Pre-ECB Resistance Check

Chart prepared by James Stanley

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

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