EURJPY tumbles from an 8-year high
EURJPY broke to an eight-year high on Wednesday but was turned down by a horizontal trendline drawn from its previous lows and highs dating back to 1996/98.
In 2000, EURJPY hit an all time low at 88.87 and rallied from there to as high as 140.91 in 2003.Also in that same year and early 2004 two sell offs were held by its weekly 100
EMA with later price action forming an ascending triangle (weekly chart). The pattern broke out and failed in both Dec’05 and Feb’06 until March’06 when a third breakout followed through and pushed the cross to the upside.
Since EURJPY’s breakout from its weekly trading range, it has pulled back and held at its breakout point and has not looked back since then until last week when it hit a resistance at a new high (148.04).The cross tumbled on Thursday and lost almost all its previous day’s gains. With a follow-through on Friday, EURJPY broke below its rising trendline originating in May to bring the week to a close at 146.32.
Figure 1: Daily Chart
Figure 2: Weekly Chart
The question now is when will the sell off stop? From what the charts are telling us, this cross still has some distance to cover on the downside. In addition, momentum indicators on both the daily and the weekly charts have turned lower, suggesting that there is plenty of room for downside gains. The cross’s next target will be the daily 50
EMA at 145.93.If it pushes through this level it should be on its way to the magenta horizontal support which converges with July 10’low and .382 Ret (March-July) at 145.00/144.86 zone but any failure at this level may lead to a deeper retracement towards .50 Ret/Jun 12’06 low at 143.88/64 zone. On the other hand, any upside move should be contained by the broken rising trendline which now serves as resistance.
Figure 3: Monthly Chart
All in all, EURJPY’s long term trend is still sloping upward suggesting that as long as the range breakout point is not violated to the downside the trend remains intact.
Happy Trading
Mohammed Isah is a private trader and an independent technical analyst. He initially traded stocks and now primarily focuses on forex. He produces Weekly, Mid-Week and Friday forex technical research which is available at
www.tradingmarkets.com/fxtechnicalresearch. He also has a Daily, Weekly and Monthly pivot points reports. You can contact Mohammed on his pivot points reports and other enquiries at:
isahmo@gmail.com