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Talking Points:

- We’ve been following the breakdown of the prior bullish trend in EUR/JPY, and the pair is now finding resistance at a zone of prior support. This keeps the door open for short-side strategies, and an analyst pick was just published around this setup in the article entitled, Bearish EUR/JPY with Deeper Breakdown Potential.

- EUR/JPY continues to show bearish tonalities, and this may be a more attractive pair for short-side Euro strategies as the US Dollar faces a couple of key drivers over the next two weeks with inflation data and a widely-expected rate hike next Wednesday.

- If you’re looking to improve your trading approach, check out our Traits of Successful Traders research. And if you’d like more of a basic primer for the FX market, check out our New to FX Guide.

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EUR/JPY Lower-Lows, Lower-Highs Begin to Show in February

EUR/JPY was in a consistent bullish trend as we opened the door into 2018; perhaps even more so than what was seen in EUR/USD. While the ECB’s extension of stimulus into 2018 brought upon a support break in EUR/USD last October, EUR/JPY merely moved down to a big zone that had previously held the lows and buyers came-in to quell the declines. After a trend-line test in mid-December, price action volleyed-higher and that continued as we traded through January of this year.

EUR/JPY Daily Chart: Support Holds Around October ECB, Bulls Take-Over Mid-December

eurjpy price chart daily time frame

Chart prepared by James Stanley

A fresh two-year high was set on the second trading day of February, and that’s about the time that tonality began to change in the Yen and, more to the point, EUR/JPY. A quick drop to that prior support zone found buyers again, but that strength waned as we moved deeper into the month. Highs began to come-in at lower levels as buyers got less enthusiastic and bears got a bit more aggressive, and by the end of the month price action had burst down to fresh five-month lows.

EUR/JPY Price Chart: Four-Hour Time-Frame, Breakdown of Bullish Trend, Resistance at Prior Support

eurjpy price chart four hour time frame

Chart prepared by James Stanley

Bearish Move Continues in Early-March

A bit of support showed at an interesting spot, aided in-part by the 130.00 psychological level. The Fibonacci level at 129.66 appeared to offer an assist as we had two days of tests at that level before buyers were able to push prices higher. Price action has begun to exhibit a bit of resistance around that prior zone of support, and over the past week, sellers have been able to hold the highs below the 132.05 Fibonacci level.

This keeps the door open for short-side plays. We’d previously looked at using prior resistance around 133.00 for short-side setups, and that led into the move that crafted fresh five-month lows. At this point, that Fibonacci level that had helped to hold support for the final four months of last year can be used as resistance. An analyst pick was just published on the setup, looking at stops above the February 27th swing-high of 132.20, and initial targets set to the 130.00 psychological level.

EUR/JPY Price Chart: Four-Hour Time Frame, Bearish Continuation Potential

eurjpy price chart four hour time frame

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the Euro or Japanese Yen? Our DailyFX Forecasts for Q1 have a section for both EUR/USD and USD/JPY. We also offer a plethora of resources on our EUR/JPY page, and traders can stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

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

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Contact and follow James on Twitter: @JStanleyFX