Could EUR/JPY make a run at the Dec high?
It’s been a very interesting couple of months for EUR/JPY. In early
December the cross was rallying very strongly, breaking up through the 143
level. Then some good data came out of Japan and the market reversed
course very rapidly, falling about 500 pips in basically two days. Since
then, EUR/JPY has been trading fairly choppily. Early this month, the cross made
a new relative low near 137, but could not sustain the move. It rebounded
back above 138, and as we have seen lately, kept going up through 140.
The market is at a potentially critical point. As the chart below
shows, EUR/JPY has reached the 141 level, which is the same level as the peak
prior to the December highs.
As you can see, yesterday’s move up to 141 took the cross just above the
upper Bollinger Band. We are currently seeing a fairly predictable
pull-back to get the market back inside the Bands. How things progress
from here will decide whether EUR/JPY is going to make a run at those highs from
last month, or whether we’re looking at a move back in to the consolidation
range – possibly even the completion of a head-and-shoulders pattern.
The hourly chart above shows the progress since the market broke out of the
range it got in to toward the end of last week. The break happened when
trading resumed in Asia Sunday evening. If EUR/JPY can stay above 140,
then the prospects for the cross should be pretty bullish. The market may
yet have to pull back to that mark to fill the gap which shows on the daily
chart in order to finally be ready to move. As such, that could be a very
good buying opportunity. Don’t get caught waiting for a full pull-back
that may not happen, though. If EUR/JPY can get above 141 and stay there,
then the expectation has to be for a rally toward 143.
Note: For the sake of full disclosure it should be stated that last
week I recommended EUR/JPY longs to the readers of my advisory, the Anduril
Trading Report, and that the portfolio I manage for Anduril Analytics is long
the cross as well.
John Forman is a near 20-year veteran of trading and investing across a wide array of markets and instruments. He is author of the forthcoming book,
The Essentials of Trading: From the Basics to Building a Winning Strategy (Wiley, April 2006). His analysis and market comments have been found in the financial news media across the world and he has published dozens of articles on trading methodology and analytic technique. To learn more about John’s research and trading activities, visit the
Anduril Analytics website.