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EUR/JPY Technical Analysis: Welcome Back, Big Figure (¥120.00)

EUR/JPY Technical Analysis: Welcome Back, Big Figure (¥120.00)

James Stanley, Senior Strategist

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Talking Points:

In our last article, we looked at the potential for bullish continuation prospects in EUR/JPY. After the ECB meeting from the week-prior, the pair had ran-up to set a new short-term high; after which a retracement of that bullish move had set-up a ‘higher-low’ around a key zone of support in the range between 121.65-121.95.

This support did not hold; and since then, we’ve had bears envelop near-term price action in EUR/JPY as the pair has shredded down to a deeper, perhaps more pivotal level of potential support. This level around ¥120.00 is very important to EUR/JPY price action; as just ten pips below we have a key Fibonacci retracement level at 119.90 – which is the 61.8% retracement of the 25-year move in the pair (taking the highest high (2008) and lowest low (the year, 2000) of the past 25 years).

Chart prepared by James Stanley

Traders would likely want to avoid chasing the move-lower from here. This near-term burst of weakness could certainly carry continuation potential; but the prospect of selling whilst at a key area of long-term support could be daunting.

For those that do want to sell, they’ll likely want more information before plotting that strategy: Either a continued down-side run that could open the door for utilizing ¥120.00 as ‘lower-high’ resistance; or perhaps letting price action run up to a shorter-term swing point such as ¥120.82. Either of these methods could make for a more attractive way of looking for continuation rather than just chasing the move-lower.

On the bullish side, traders would likely want to see some element of support before looking to get long. If we can get some evidence of such, the prospect of a reversal setup could become considerably more attractive. But – if no support around ¥120.00 – no reversal. Catching falling knives can be a perilous task.

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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