EUR Technical Analysis

Relevant to bulls is the fact that another throw of QE from the European Central Bank in December merely elicited a ‘higher-low’ in EUR/JPY without as much as a prior support test. This is another deductively bullish indication that can increase the interest for longer-term bullish approaches. There is but one issue with that approach at the moment, and that’s the fact that resistance in the zone from 123.09-124.09 has proved extremely rigid and difficult to break.

After short-term support had yielded to selling pressure last week, buyers returned to drive prices higher but were unable to even reach that prior zone of resistance at 123.09, leading to a short-term ‘lower-high’ in the pair. So, what we have now is a shorter-term range that’s a bit messier and more difficult to work with; while the longer-term bullish posture remains intact.

For those that do want to trade the bearish side of EUR/JPY, they’d likely want to wait for a break of the confluent zone of support around the 120.00-figure. This zone has the 61.8% Fibonacci retracement of the ‘big picture’ move in EUR/JPY (the low in the year 2000 up to the 2008 high), the 38.2% retracement of the ‘post-Election move is at 120.15 and, of course, 120 itself is a major psychological level in the pair. Should price action break-down to this zone, this could open the door for bullish positions. But if we do get a concerted break of this area, with buyers unable to quell selling pressure – this can open the door to bearish continuation.

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The Euro recoiled sharply higher after hitting the weakest level in two months against the British Pound but overall positioning still seems to favor the downside. Continued selling from here puts the spotlight on a major double bottom capping losses since early September 2016.

Near-term support is in the 0.8334-70 area (double bottom, 50% Fib expansion), with a daily close below that exposing the 61.8% level at 0.8257. Alternatively, a turn back above the 38.2% Fib at 0.8484 opens the door for a retest of rising trend line support-turned-resistance, now at 0.8568.

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Daily close below the 0.8469-80 area (trend line, March 31 low) paves the way for a challenge of the February 22 bottom at 0.8403. Alternatively, a move back above support-turned-resistance at 0.8605 (March 23 low) targets a chart inflection point at 0.8687.

Needless to say, positioning is inconclusive at this point. On one hand, a breakdown has not been confirmed and entering short with prices sitting squarely on support is unattractive from a risk/reward perspective. On the other, a bullish reversal signal is absent. Staying flat seems most prudent for now.

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The Euro spiked dramatically higher against the British Pound following the results of first-rounding voting in the French presidential election. Prices are now retesting trend line support-turned-resistance whose break last week may have marked completion of a large Head and Shoulders topping pattern.

From here, a daily close above 0.8480 (trend line, March 31 low) opens the door for a test of support-turned-resistance at 0.8605, the March 23 low. Alternatively, a move back below the February 22 bottom at 0.8403 paves the way for a challenge of a double bottom at 0.8334.

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The primary initiator of the move were French elections over the weekend; as this weekend’s election results ushered-in a return of risk tolerance. And with this return of risk tolerance came another bump-higher in equities, a bump-lower in Gold prices, and another leg of weakness for the Japanese Yen.

The bullish move in EUR/JPY extended on Tuesday to cross-above the pivotal ¥120.00 level; but another level/zone of resistance is showing that may bring pause to the continuation of the bullish move. The level at ¥121.95 is the 50% Fibonacci retracement of the ‘Abe-nomics’ move in EUR/JPY, taking the low from 2012 up to the high in 2014. But very near this level is another key element of resistance, as a down-ward sloping trend-line that’s held the highs in EUR/JPY since mid-December of last year is projected just-above this area.

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The net of the past three weeks of price action in EUR/JPY has been a rather chaotic range near the top of a well-developed bullish move. So, while near-term price action has taken on a bearish tonality, the longer-term formation here is still bullish in nature. Nonetheless, price action remains very close to the top of that longer-term bullish formation, and traders may want to look for a deeper retracement before adding bullish exposure with longer-term time horizons. There are two potential zones to watch for such an indication; with ‘S1’ showing between 121.62-121.96, while ‘S2’ straddles the 120.00 psychological level (119.91-120.32).

For shorter-term bearish strategies, we’re at an interesting area of potential resistance. We had looked at 124.50 as a ‘line of demarcation’ in our previous article, and this area continues to elicit interest. This area had given a brief element of resistance before the bearish move extended after this week’s open; and taking a Fibonacci retracement around this most recent bearish move shows the 50% marker at 124.62. This can open the door to short-side swings with stops above 124.78 or 125.00, with targets cast towards 123.75 and then a re-test of prior lows at 123.22.

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Weekly price is on ranging within Ichimoku cloud for direction:

Weekly price is located within Ichimoku cloud in the ranging market coindition: the price is going for 1.5096 resistance to be testes for the bullish revbersal to be started:

The Euro looks poised to continue higher after jumping to the highest level in eight months and reclaiming a foothold above the 0.89 figure against the British Pound. The move follows a month of sideways consolidation and hints the rising trend set from mid-April lows has resumed.

Near-term resistance is now at 0.8973, the 38.2% Fibonacci expansion, with a break above that on a daily closing basis opening the door for a test of the 50% level at 0.9040. Alternatively, a reversal back below the 23.6% Fib at 0.8891 exposes the 0.8840-52 area (14.6% expansion, January 16 high).

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The Euro put in a dramatic Shooting Star candlestick following a test of resistance below the 0.91 figure against the British Pound, hinting a turn lower may be ahead. Early signs of negative RSI divergence point to fading upside momentum and bolster the case for a downside scenario.

From here, a break back below 0.8990 (14.6% Fibonacci expansion, trend line) opens the door for a test of resistance-turned-support at 0.8923. Alternatively, a breach of the 23.6% level at 0.9051 confirmed on a daily closing basis sees the next upside barrier marked by the 38.2% Fib at 0.9150.

A Shooting Star candle is a sign of indecision and does not amount to an actionable sell signal without further evidence, even with the support of RSI divergence. With that in mind, current positioning is interesting to monitor but committing to trade appears premature for the time being.

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