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GBP/JPY & EUR/JPY Signal Changing Gear from Neutral to Bearish

GBP/JPY & EUR/JPY Signal Changing Gear from Neutral to Bearish

2020-02-25 16:30:00
Mahmoud Alkudsi, Analyst
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EUR /JPY & GBP/JPY Technical Outlook

  • Will bears control price action?
  • Critical chart's levels to consider

Weaker Euro Across the Board

Last week, Euro printed its lowest level against Japanese Yen in over four months at 118.46. However, the market rallied after as some bears seemed to cover. On Friday, the weekly candlestick closed in the green with 1.8% gain. Meanwhile, British Pound rallied on Friday to its highest level in over two months at 144.96, then closed the weekly candlestick with 0.9% gain.

The Relative Strength Index (RSI) crossed below 50 on EUR/JPY signaling a possible start of downtrend move. On the other hand, the oscillator remained flat above 50 on GBP/JPY highlighting weak bulls in a bullish market.

EUR/JPY Daily PRice CHART (JUn 26, 2018 – FEB 25, 2020) Zoomed Out

EURJPY daily price chart 25-02-20 zoomed out
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EUR/JPY Daily Price CHART (Sep 2 – FEB 25, 2020) Zoomed in

EURJPY daily price chart 25-02-20 zoomed in

Looking at the daily chart, we notice that on Feb 5 EUR/JPY failed to close above the 50-day average indicating that bears may comeback. Later, the market printed its lowest level in over four months.

On Feb 20, the price corrected its downtrend move as created a higher high at 121.39. Yesterday, the pair repeated its failure in overtaking the 50-day average yet, remained in the same trading zone 121.48 – 120.00.

A close below the low end of the zone may embolden bears to press towards 118.47. Further close below that level could send EURJPY even lower towards 117.09. Although, the weekly support level and area marked on the chart (zoomed in) should be considered.

In turn, any failure in closing below the low end of the zone reflects bear’s hesitation. This may lead some of them to exit the market allowing the pair to rally towards the high end of the zone. Further close above this level opens the door for EURJPY to push towards 122.40. That said, the weekly resistance level underscored on the chart should be kept in focus.

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GBP/JPY Daily PRice CHART (Nov 20, 2018 – FEb 25, 2020) Zoomed Out

GBPJPY daily price chart 25-02-20 zoomed out

GBP/JPY Daily PRice CHART (Oct 5 – FEb 25, 2020) Zoomed In

GBPJPY daily price chart 25-02-20 zoomed in

From the daily chart, we noticed that since the start of the year GBP/JPY developed a broadening top pattern. On Feb 13, the price broke above the downtrend line originated form the Dec 13 high at 147.96. Few days later, the price rebounded from the upper line of the broadening top pattern, then reversed to the low end of current trading zone 146.94 – 143.25.

A close below the low end could encourage bears to press towards 141.85. Further close below this level could send GBPJPY towards 139.37. Having said that, the weekly support levels underlined on the chart should be watched closely.

On the flip side, any failure in closing below the low end of the zone, signals bear’s reluctance. This could lead some of them to pullback causing a rally towards the high end of the zone. Further close above this level opens the door for GBP/JPY to surge towards 147.95. Nevertheless, the weekly resistance levels printed on the chart would be worth monitoring.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

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