Weekly analysis EUR/JPY
EUR/JPY forecast for the week of August 4, 2014
The EUR/JPY pair bounced during the week, but as you can see the 138 level still offered quite a bit of resistance. In fact, the Friday candle is a shooting star, so we feel that this market will probably continue to go lower. That being the case though, we recognize that a move above the 130.50 level would be reason enough to start buying, as we could reenter the previous consolidation area that leads all the way to the 142.50 region. That being the case, we still think the market probably heads down to 135 before it’s all said and done.
EUR/JPY forecast for the week of September 22, 2014
The EUR/JPY pair broke higher during the course of the week, but found the 141 level to be far too resistive to continue going higher. In fact, the market ended up pulling back enough to form a shooting star and as a result it appears that the market will probably fall back down towards the 138 level. The 136 level below is massively supportive, so somewhere between here and there we are looking for supportive candle in order to start going long again. On the other hand, if we break above the top of the shooting star, we are buyers there as well.
EUR/JPY At Clear Risk Of More Declines
The Euro continued to struggle against a basket of currencies including the Japanese yen. The EURJPY failed on more than one occasion to break the 147.00-10 resistance area resulting in a move lower. The pair is currently testing an important support area and if the Euro sellers clear it, then more sustained losses are feasible in the near term. There were a few releases lined up today in the Euro zone, but it looks like they are rescheduled now. So, the probability of a larger move in the Euro pairs is less and most likely there will be ranging moves in the FX market.
There is a bullish trend line formed on the hourly chart of the EURJPY pair, which might play an important role in the near term. We need to see how the pair trades in the coming sessions as it is currently testing the highlighted trend line. Recently, the pair climbed higher towards the 76.4% fib retracement level of the last leg from the 147.13 high to 146.45 low, but failed to break it. It is now trading below the 100 hour simple moving average. So, there are a lot of bearish signs on the hourly chart, which suggest that the pair might break the trend line and continue trading lower. The most important support below the trend line is around the 200 hour moving average.
Alternatively, if the EURJPY pair moves higher from the current levels, then it might find resistance around the 100 hour MA.
Overall, one might consider selling with a break below the highlighted trend line as long as the pair is below the 100 MA.
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The beauty of technical analysis - when it works and when you can sincerely take advantage of it - lies in its
catalogue of patterns. Bearish, bullish, sideways patterns, there is an armada of patterns out there supposed to help
the market technicians to spot what will be the next move (who said anticipate?). When I say "supposed", I don't mean "guaranteed" ... unfortunately.
Following this long introductive epitaph about technical analysis patterns, let's see what EURJPY price is telling us using the armada of patterns technicians discovered last decades. Well, price is trapped from 2009 inside a wedge pattern. "Trapped" is may be not the right word to use here, as EURJPY's price has been driven by all market participants, but let's stop the philosophical point of view and let's try to predict next move on EURJPY based on this pattern. It is worth mentioning about which pattern we are talking about. A bullish one? A bearish one? A sideways one?
The answer is a falling wedge! A wedge pattern warns that price will reverse - in this particular case a very longterm alarm that started back in 2009 and still counting as we are waiting for the alarm to ... ring. Next move on EURJPY should visit the 107/110 region, with 105.60 being the first obstacle. However, current Dow Theory cycle is bearish - represented by the H and L on the above chart. The short-term cycle remains bearish and as long as price (a) stay in the downside red channel (b) does not break current Dow Theory cycle, EURJPY shall score new lows later in 2012. This falling wedge will act positively on this pair later on, but for now we need a break of Dow Theory pivot (111.60) to change team - from bears to bulls.
In other words, even though we favor a rally as high as 107/110 region, EURJPY's downtrend should then resume.
See the chart on our blog
forex-analysisblog.com
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