Technical Sentiment: Bullish
Key Takeaways
EUR/JPY is in the process of correcting from a 700 pips bearish swing, targeting major resistance levels as traders need to price a Lower High within the main downtrend.
Technical Analysis
Thursday was an action packed day, with many JPY crosses experiencing wild rallies. EUR/JPY dropped a massive 200 pips during the 16th/10 European session, only to retrace those losses and then some during U.S. trading hours. This aggressive “V” shaped recovery ultimately formed a large bullish Pin bar on the Daily timeframe, dissipating selling pressure to such an extent that a larger correction should ensue.
Spot is currently trading around 136.50 EUR/JPY. This rally has already invalidated the Lower High swing structure coupled with a resistance trendline covering the entire bearish move from mid-September. On 4H timeframe, a bullish engulfing bar bounced off EUR/JPY’s support, once again located at 135.60/70, as buyers dominate for now.
Free Reports:
138 should be the main target for next week. A large resistance cluster is located here, making this an excellent area for a potential Lower High. Between 137.50 and 138.00 we can observe a confirmed price pivot zone, 50-Day and 100-Day Simple Moving Averages, 50% Fibonacci retracement and 200 SMA on 4H. Although a rally above 138.00 is highly unlikely at this point, we cannot exclude a 200-Day Moving Average re-test at 139.15.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
