EUR/JPY Confirms Bearish Outlook; 2014-Low in the Scope

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EUR/JPY Confirms Bearish Outlook; 2014-Low in Scope

EUR/JPY has been trading sideways in 2014 after hitting a high of 145.69 to end 2013. The daily chart shows a market that has been trading within that 2013-high of 145.69 and the 2014-low of 136.23.  So no matter what happens within this range, you can say price is sideways.

EUR/JPY Daily Chart 6/10
eurjpy 6/10 daily chart

However, we can observe some bearish signals within the consolidation range, most coming in since May.

1) The break below 100- and 50-day SMAs in May.
2) The break below a rising trendline in May.
3) RSI tags 30, but fail to break above 70 in March. This shows momentum has turned sideways if not bearish.
4) Price held at 140. This was previous support turned into resistance and shows EUR/JPY is bearish below 140.
5) Price held below the 100-, and 50-day SMAs.
6) The RSI tagged 30, then failed to push above 60. This shows momentum is turning bearish.

The next bearish confirmation would be a break below the 200-day SMA. If price can hold below 138.50 after today’s decline, then it would close below the 200-day SMA. The next key support below the 138 handle will be the 2014-low at 136.22. The combination of these bearish signals make this a viable target.

EUR/JPY 4H Chart 6/10
eurjpy 4h chart 6/10

Trading a Pullback:
When you look at the 4H chart, you also see a bearish signal as price held below the 200-4H SMA. Notice that the RSI is about to be oversold as price approaches the 138 area. We might get a pullback even before the break below 138. Either way, watch for the 4H RSI to hold below 60, and price preferably below 139.50. If price is around 139 or 139.25 and RSI near 60 and the market shows resistance, be ready for another bearish swing.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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