Never miss a story from James Stanley

Subscribe to recieve updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from Daily FX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to James Stanley

You can manage you subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Talking Points:

- EUR/JPY has reversed by more than 300 pips off of the two-year high set just last Friday.

- Are you looking to improve your approach to markets? Our Traits of Successful Traders research may be able to help.

- If you’re looking to learn more about the FX market, please check out our New to FX Guide.

To receive James Stanley’s Analysis directly via email, please sign up here

EUR/JPY came into 2018 exhibiting the same strength that denominated much of the pair’s performance last year. The year of 2017 produced quite the run for EUR/JPY, as markets continued to attempt to get in-front of any potential tightening out of the ECB while expectations remained for the BoJ to remain loose and passive. But already, the New Year is proving to be a change of pace, as EUR/JPY reversed that bullish move and has now sold-off by more than 300 pips from the high that was set last Friday.

On the hourly chart below, we’re focusing-in on this recent reversal, and notable is how each fresh swing-high failed to test the prior swing-low of support. Also of note is how key areas of support, such as 135.00 or 134.41 have been unable to produce any element of respite in this down-trend; further illustrating just how bearish near-term momentum has become. Sellers haven’t even been willing to wait for resistance to show off of prior support, instead pushing the pair-lower before resistance might be able to come into play. This type of bearish anticipation from sellers can portend a continuation of the move-lower.

EUR/JPY Hourly: Bears Take Control Off of the Friday High

EUR/JPY Technical Analysis: Bears Push to Support, but Will Bulls Respond?

Chart prepared by James Stanley

The bigger question at this point is one of longer-term direction: EUR/JPY was strong throughout much of last year; and after an evening star formation printed on the daily chart with price action from Thursday, Friday and Monday of this week, near-term momentum has moved into a considerably bearish state. This leaves traders with the choice of following near-term momentum with the expectation of a reversal of the longer-term bullish trend, or to wait for price to hit longer-term levels of support in the effort of substantiating longer-term bullish plays. The daily chart of EUR/JPY may provide a bit of clarity on the matter, or at the very least help the trader determine their approach to the situation.

From September of last year into mid-December, EUR/JPY stuck within a fairly strong range. Resistance was showing at 134.41, or the 61.8% retracement of the 2014-2016 major move in the pair, while support was showing in a zone from 131.43-132.05. There were multiple inflections on each side of the range until prices finally posed a top-side break towards the end of the year. This led all the way into Friday’s fresh two-year high at 136.64. But since that high moved into a bearish pattern, few signs of support have been evident just yet, and this keeps the door open for two areas of importance. We’re fast nearing a trend-line projection that can be found by connecting the August low to the November low. And just below that trend-line is the same area of support that had become commonplace in Q4, running from 131.43-132.05. Each of these remain as potential support plays in EUR/JPY. Given how quickly this bearish move has come-in, traders will likely want to wait for support to settle-in before looking to buy; even at risk of giving up some of the topside move.

EUR/JPY Daily: Fast Approaching Longer-Term Support Zone, Trend-Line Projection

EUR/JPY Technical Analysis: Bears Push to Support, but Will Bulls Respond?

Chart prepared by James Stanley

For bearish approaches: Considering how fast and by how much this move has priced-in, traders would likely want to approach the short-side of EUR/JPY with caution. Short-term momentum strategies could allow for down-side entries; but with prices fast approaching longer-term support, profit potential and risk outlay become a concern. A down-side break of 131.00 could open the door for longer-term bearish approaches, as this would provide a fresh four-month low combined with a break of the support zone that held up the range so well to close out last year.

--- Written by James Stanley, Strategist for DailyFX.com

To receive James Stanley’s analysis directly via email, please SIGN UP HERE

Contact and follow James on Twitter: @JStanleyFX