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Talking Points:
- EUR/JPY Technical Strategy: Intermediate-term: Mixed, short-term bullish
- EUR/JPY has put in an aggressive move off of a key support zone, but with the European Central Bank set for another rate decision tomorrow, EUR/JPY is working very near a key zone of resistance.
- If you’re looking for trading ideas, check out our Trading Guides, they’re free and updated for Q1, 2017. If you’re looking for shorter-term ideas, check out our Speculative Sentiment Index (SSI) indicator.
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.
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:
Chart prepared by James Stanley
--- Written by James Stanley, Analyst for DailyFX.com
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