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EUR/JPY Technical Analysis: Bullish Run Turns into a Stampede

EUR/JPY Technical Analysis: Bullish Run Turns into a Stampede

James Stanley, Senior Strategist

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Talking Points:

In our last article, we looked at the bullish burst in EUR/JPY that started after the first round of French elections. After those elections, the risk trade gapped-higher when markets opened on Sunday and, for the most part, that move has only continued to heat-up. In our last piece, we looked at a key resistance level at 121.95 on EUR/JPY, and that level has been eclipsed by an exuberantly bullish run, and, at least as of yet, price action hasn’t yet pulled back. On the below chart, we’re putting this move in scope with the addition of the Relative Strength Index, which less than three weeks ago was dwindling in over-sold territory.

EUR/JPY Technical Analysis: Bullish Run Turns into a Stampede

Chart prepared by James Stanley

Within the past three weeks we’ve seen quite a few drivers around EUR/JPY. Last week brought the European Central Bank, and despite Mr. Draghi’s dovish hints, the pair merely put in a minor pullback before buyers responding with even more demand. Yesterday brought a Federal Reserve rate decision, and that gave the risk trade another bump-higher as the Japanese Yen weakened against most major currencies.

So, at this point the bullish trend is encouraging in EUR/JPY but the levels that we’re trading at urge caution for continuation approaches. We’re already within the zone of resistance that had capped the bullish advance in December and January. And given that there’s been very little pullback on this out-sized run-higher, the litmus for continued gains will likely continue to increase; as we’ve seen numerous resistance levels shattered by higher prices with very little slowdown.

With a pivotal NFP report on the docket for tomorrow, this could be an opportune time to begin scanning for a pullback in the pair in the effort of trading a top-side continuation move. On the chart below, we look at three potential areas to watch for ‘higher-low’ support to build in the effort of bullish continuation.

EUR/JPY Technical Analysis: Bullish Run Turns into a Stampede

Chart prepared by James Stanley

--- Written by James Stanley, Strategist 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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