EUR/JPY 4H Chart 9/28/2012 10:50 AM EDT
Testing trendline: This week, the EUR/JPY bounced off a rising trendline going back to to the July low of 94.10. However, price action remains bearish in the 4H chart. Note the stronger black candles vs. white candles this week as the market dragged euro lower against the yen. There was a bullish divergence with the RSI but that’s resolved with the reading going back to 50. Now, it is holding under 50, a sign that bears are maintaining momentum. As we begin the 9/25 US session, the EUR/JPY is back to test this rising trendline.
Upside risk: At the moment, ability to hold above the trendline, and return above 100.50 keeps upside risk to the 101.65 resistance pivot, right under the 200-day SMA, as seen in the daily chart. Maybe there’s some elbow space to 102.00, but above that, the market could be in the process of revisiting the 103.86 Sept-high.
Breakout scenario: Below the trendline, and if the market holds 100.00 after a subsequent pullback, it would be focused on the 99.13 support pivot down to the 99 handle, which include the 50% retracement of the 94.11-103.86 rally. Below that, we should hold the bearish expectation to 97.80 resistance/support pivot, which is also near the 61.8% retracement.
We should probably hold off strong bearish outlook until the RSI reading falls back below 40 in the daily chart.
EUR/JPY Day Chart 9/28/2012 11:02AM EDT
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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