The FX Trader’s view – For the last few months the EUR/JPY cross rate has been range-trading, unable to push above key overhead resistance. Just recently there was a clear break of a key support area, tipping the scales in the shorter term bears’ favour.
- MONTHLY CHART:
This year’s recovery failed just ahead of the old highs from 2003/2004 and the 141.00 50% retracement level.
Repeated failure to break through this has recently led to an initial bear signal on the Daily chart. - DAILY CHART:
Last week there was finally a clear bear break below key support around the 129.75/130.00 area.
This initially opened the way for a test towards the 50% pullback level –but the strength should be there to push lower in due course.
Note the lower 1.618 swing projection (from the Oct 129.01-138.51 upleg) around 123.14, for example.
Overhead, the 50% bounce level at 132.70 offers possible resistance to a s/term rally – it doesn’t matter that the former key support level has been surpassed by the s/term bounce; the damage has already been done. - Any sellers into that 50% level would likely have initial stops just above the 135.71 04-Nov high, as a recovery through here would certainly negate the bear analysis.
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