Bearish Swing and a Consolidation:
EUR/JPY started October consolidating. Then from the high on the month at 137.93 last week, it started to slide. This week, the EUR/JPY has found support at 135.03 and started to consolidating again. Let’s take a look at the 4H chart to assess the current technical condition of the euro-yen.
(click to enlarge)
Here are a few observations from the 1H chart:
1) Price has broke above the 50-period SMA and the falling trendline from last week. (Bullish)
2) This week’s price action does look like a price bottom attempt as we saw multiple failures to tag the 135.03 low, but it has now stalled under 136.00. (Neutral)
3) The 1H RSI however has shown maintenance of the bearish momentum as it holds below 60 after being able to push below 30 a couple of times in October. (Bearish)
4) Furthermore, price is still holding below the 100-period SMA, threatening to come back below the 50-period SMA as well. (Bearish)
The EUR/JPY thus looks like it has been trying to build a price bottom for a couple of sessions, but has fallen short so far. IF price can push above 136.0, the current consolidation will start to look like a price bottom and we might have a bullish correction outlook at least in the short-term.
In this scenario, we should first expect sellers in the 136.50 area, where we see the 200-hour SMA and a falling trendline that goes back to the 141.22 high of September.
(click to enlarge)
136.50 and Upside Risk:
The 4H chart shows the key level of 136.50. So, first let’s see if price breaks 136. Then if we get resistance from 136.50, let’s see how price reacts to the current price bottom. If it can hold above 136.00 for the most part, the pressure remains on the 136.50 resistance. A break above 136.50 would expose further upside, perhaps toward the October highs in the 137.90-138.00 area, which is a support/resistance pivot area, and where the 200-period SMA in the 4H chart resides.
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