Forex Technical Update

EUR/JPY 15min chart 9:45AM EST 1/14/2013

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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

EUR/JPY 1/14/2013 1H chart

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.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.

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