EUR/JPY 15min chart 9:45AM EST 1/14/2013
Flag: The Euro started the week extending strength against the beleaguered Japanese Yen, but found some short-term resistance so far at 120.11. The EUR/JPY market reacted with a fall to 119.00 by the 1/14 US session. This decline has developed a flag pattern seen clearly in the 15-min chart. I want to offer a couple of possible scenarios.
Breakout: A break above 119.35 could be a sign of a flag pattern breakout. This could be a bullish continuation signal. But be careful. The 15-min chart shows the market has lose bullish momentum and could be establishing bearish momentum. If the RSI does not turn back above 60, there is a chance that the anticipated rally is a bull trap, and further correction can develop.
Support: If the market slides further down, the 118.55 could be important as it acted both as resistance and then support on Friday Jan. 11. A break below this could open up the next support area between 117.60 and 117.75.
Looking at the 1H chart, it might be worth considering completion of short-term bearish correction cycle when the 1H RSI tags 40. It should hold above 40, if the trend and momentum remains bullish. I think a bearish outlook should remain on the shelf until a break below 61.8% retracement and the 116 resistance from previous consolidation area.
EUR/JPY 1hour chart 9:56AM EST 1/14/2013
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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