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EUR/JPY Technical Analysis: Blast-Off to Fresh 2017 Highs

EUR/JPY Technical Analysis: Blast-Off to Fresh 2017 Highs

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Talking Points:

In our last article, we looked at a bullish setup in EUR/JPY after price action broke-above a bear flag formation that had built over the prior month. But even while that bear flag was showing a retracement of the ‘bigger picture’ bullish trend, buyers remained vigilant; not allowing prices to drop below the 38.2% Fibonacci retracement of the most recent major move.

4-Hour EUR/JPY with emphasis on yesterday’s Bullish Breakout

Chart prepared by James Stanley

Yesterday saw Mario Draghi offer comments regarding the ECB’s forward-looking outlook, and markets responded with an outsized gust of strength in the Euro; driving EUR/JPY up to a fresh yearly high of ¥127.86. Earlier this morning, reports began to circulate that ECB ‘sources’ indicated that Mr. Draghi’s speech yesterday was ‘misjudged’ to mean that the bank is getting closer to tightening policy when the intent was to be more balanced in nature. But regardless of the noise, the market reaction was telling as prices in EUR/JPY posed a quick dip after these comments began to circulate through the market, at which point buyers soundly pounced on the move to re-drive EUR/JPY right-back towards those prior highs.

The point where the bounce began is an area of interest, as this syncs with the April 2016 high in EUR/JPY. On the chart below, we’re looking at the April swing-high that helped to set intra-day support after this morning’s dip in EUR/JPY:

EUR/JPY Daily Chart with emphasis on April 2016 swing-high

Chart prepared by James Stanley

After this morning’s support test, buyers have quickly driven the pair back towards prior highs, and this highlights the potential for bullish continuation in the pair. The challenge at this point is one of entry, as prices remain rather elevated from nearby support levels after this recent run-higher, and a bit of resistance has begun to show on the hourly chart around the ¥127.86 swing-high.

On the chart below, we look at four different potential support levels above the prior swing-low of ¥124.71; and each of these could be usable for bullish re-entry. Key would be letting support actually show before triggering long. Alternatively, the possibility of bullish breakout entry logic is available, using this morning’s high of ¥127.86, with targets set towards resistance at ¥128.52.

EUR/JPY 30M Chart with Potential Support Levels Applied

Chart prepared by James Stanley

--- Written by James Stanley, Strategist 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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