EUR/JPY Price Forecast: Bullish Sentiment Grows After Breaking 123.10
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EUR/JPY Price Outlook
- EUR looking ahead to important data releases tomorrow, including Q1 German GDP.
- EUR/JPY A break above 123.07 likely to test 124.20.
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EUR/JPY CORRECTION AFTER A DOWNTREND
On May 6 a bearish momentum was confirmed on EUR/JPY with a downside breakaway gap. On May 13 the price opened with another gap to the downside showing more weakness and pointing lower towards 122.08, its lowest price in more than 4 months. EUR/JPY pulled back in the same day and closed with a long legged Doji pattern, reflecting hesitation from the sellers and indicating a potential change of direction.
EUR/JPY closed with 3 Doji patterns in the following trading days, emphasizing a weakness in this bearish momentum and paving the way for the price to correct higher. Yesterday, the price rallied and printed 123.75, breaking above the May 10 high at 123.61 and ending the downtrend momentum.
EUR/JPY DAILY PRICE CHART (NOV 2018 - MAY 22, 2019)
A closer look at the EUR/JPY daily chart shows the price breaking above the downtrend line originated from April 17 high at 126.81 and closing above 123.10 moving to the higher trading range (123.10 -124.20). This bullish development could entice the pair to rally towards the high end of mentioned range. However, a series of daily and weekly resistances at 123.64, 123.88 and 124.09 must be cleared first. Any close above 124.20 would likely move the pair to a higher trading range and pave the way to a rally towards 124.90, contingent on clearing the weekly resistance at 124.54.
Today the pair probed lower and found support at the low end of the trading range mentioned above. EUR/JPY may edge lower if the price closes below the zone 123.10 -123.05 hinting at a move towards 122.50. Supports levels at 122.92 (daily support at the downtrend line mentioned above) and 122.61 need to be kept in focus.
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EUR/JPY 2 HOURS PRICE CHART (MAY 22, 2019)
Looking into EUR/JPY 2-hour chart, we notice the price printed a high today of 123.51. Any break above this threshold could start a bullish sentiment towards yesterday’s high located at 123.75. However, the daily resistance mentioned above at 123.63 needs to be watched.
EUR/JPY could rally towards 123.75 and fall after to form a double top pattern where the neck line resides at 123.06. If the pair breaks and remains below the neck line this suggests EUR/JPY would likely point lower towards 122.40. Support levels at 122.92, 122.78 and the zone (the low of May 21 at 122.67 - Daily support at 122.62). The end of the trading range at 122.50 is also worth monitoring.
The above scenario may still be valid even if the price does not form a second top. In this case a break below 123.05 would start a bearish momentum hinting towards 122.50. Support levels and zones mentioned above need to be monitored closely.
Written By: Mahmoud Alkudsi
Please feel free to contact me on Twitter: @Malkudsi
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.