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GBP/JPY & EUR/JPY Test Critical Levels – Watch the Signals

GBP/JPY & EUR/JPY Test Critical Levels – Watch the Signals

2020-02-18 15:00:00
Mahmoud Alkudsi, Analyst
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EUR /JPY and GBP/JPY Technical Forecast

  • Bearish signals on EUR/JPY and GBP/JPY price charts
  • Key levels and thresholds to monitor

Euro Suffers Further Losses

On Friday, Euro retreated to its lowest level in four months against Japanese Yen at 118.86 then closed the weekly candlestick in the red with 1.0% loss. Meanwhile, British Pound rallied to its highest level in three weeks versus Japanese Yen at 143.48 then closed the weekly candlestick in the green with 1.2% gain.

The Relative Strength Index (RSI) pointed lower from 40 to 31 emphasizing the strength of the bearish momentum on EUR/JPY. On the other hand, the oscillator crossed above 50 on GBP/JPY then remained flat highlighting bulls lack of momentum to lead the price.

EUR/JPY Daily PRice CHART (Nov1, 2018 – FEB 18, 2020) Zoomed Out

EURJPY daily price chart 18-02-20 zoomed out
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EUR/JPY Daily Price CHART (Sep 2 – FEB 18, 2020) Zoomed in

EURJPY daily price chart 18-02-20 zoomed in

Looking at the daily chart, we notice that since on Jan 22 EUR/JPY closed below the 50-day average providing the first signal that bears were preparing to take charge. Second bearish signal came on Jan 24 when the price broke below the uptrend line originated from the Sep 3 low at 115.86 hinting to fall towards 118.47.

On Feb 10, the market provided another bearish signal as moved to a lower trading zone 120.00 -118.47. Therefore, a close below the low end of the zone may convince EURJPY bears to press towards 117.09. Although, the weekly support level and zone marked on the chart (zoomed in) should be kept in focus.

In turn, any failure in closing below the low end of the zone indicates bears hesitation. This could lead some of them to exit the market reversing the pair’s direction towards the high end of the zone. Further close above this level opens the door for EURJPY to rally towards 121.48. Having said that, the weekly resistance levels printed on the chart should be watched closely.

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GBP/JPY Daily PRice CHART (Nov 20, 2018 – FEb 18, 2020) Zoomed Out

GBPJPY daily price chart 18-02-20 zoomed out

GBP/JPY Daily PRice CHART (Oct 5 – FEb 18, 2020) Zoomed In

GBPJPY daily price chart 18-02-20 zoomed in

From the daily chart, we noticed that in late Jan- early Feb GBP/JPY failed twice to rally above 143.25 as bears came back every time and led the price. Last week, same scenario was repeated.

Yesterday, the market tested the high end of current trading zone 143.25 – 141.85, then fell eyeing a test of the low end of it. Thus, a close below the low end could encourage GBPJPY bears to press towards 139.37. Further close below this level might cause more bearishness towards 137.54. That said, the weekly support levels underlined on the chart (zoomed in) should be considered.

On the flipside, any close above the high end reflects bears hesitation. This could lead some of them to exit the market allowing GBPJPY to rally towards 146.94. Yet, the weekly resistance levels underscored on the chart would be worth monitoring.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

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