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EUR/JPY Technical Analysis: Bull Flag Break Opens Door for Continuation

EUR/JPY Technical Analysis: Bull Flag Break Opens Door for Continuation

James Stanley, Senior Strategist

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Talking Points:

In our last article, we looked at EUR/JPY testing longer-term support after the June ECB rate decision. At that rate decision, the European Central Bank echoed a dovish tone which produced a short-term burst of Euro weakness. But buyers showed-up around prior support, and a week later we saw another iteration of support around the 122.50 area, eventually leading to a top-side break of the bull flag formation in EUR/JPY.

EUR/JPY Technical Analysis: Bull Flag Break Opens Door for Continuation

Chart prepared by James Stanley

As we remarked in our prior article, given the potential for a continuation of bullish price action, taken from a combination of EUR/JPY’s adherence to longer-term support structures combined with the fact that the pair shrugged off a series of negative factors without a more pronounced sell-off; and traders can move-forward with a bullish bias on the pair. On the 4-hour chart below, we’re zeroing-in on that support structure that can be found around the psychological level of ¥122.50.

EUR/JPY Technical Analysis: Bull Flag Break Opens Door for Continuation

Chart prepared by James Stanley

For entry protocol: We’re dialing-in on the hourly chart below with a Fibonacci retracement applied to the most recent bullish move, taking the low set last week up to the high set just yesterday. Current price action is finding support at the 23.6% retracement of this move, and for those that want to move-forward in an aggressive manner on EUR/JPY, this could be usable with stops applied below the 123.50 level, as this is the 50% retracement of that most recent major move.

For those that want to move-forward a bit more conservatively, that same 123.50 level could be used to look for deeper support, at which point the door can be opened for bullish reversal plays with stops applied below the prior low of 122.35.

EUR/JPY Technical Analysis: Bull Flag Break Opens Door for Continuation

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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