EUR/JPY – Price Bottom and the Bullish Scenario

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EUR/JPY - Price Bottom and the Bullish Scenario

Lowest Since June 2013: EUR/JPY has been bearish, sliding to a low on the year at 126.09 about a week ago. This was the lowest the pair has seen since June 2013. Since this low, price action appears to be setting up a price bottom for a bullish correction. Let’s take a look at this price action starting with the 4H chart.

EUR/JPY 4H Chart 4/21
eurjpy 4h chart 4/21
(click to enlarge)

Bearish Technicals: The 4H chart still shows a bearish market for the most part. Price is still below the 100-, and 200-period simple moving averages. Price is holding under 128.76, which was the support area of a previous period of consolidation. Furthermore, the RSI has held under 60 after it tagged below 30, which reflects maintenance of at least April’s bearish momentum.

Bullish Attempt: Now, even though the overall technical picture is bearish, examination of price action suggests some further bullish correction. Note that the bullish candles since the 126.09 low have been much more aggressive than the in-between bearish candles. As we wind down the 4/21 US session, the market seems to stick with support at 127.50, which confirms a small price bottom. EUR/JPY is now testing the 128.76 resistance as the 4/21 session winds down.

EUR/JPY Daily Chart 4/21
eurjpydailychart04212015
(click to enlarge)

Room within Downtrend: In the daily chart, we see that there is some room to rally within the context of a bearish market. Above 128.76, EUR/JPY would also break above a falling speedline and open up the 131.35-131.50 area, which involves the 50-day SMA, another falling speedline, and a previous resistance.

We should expect resistance here in this 131.35-131.50 area especially if the daily RSI is around 60. From there, we can expect a bearish attempt towards the 127.50 pivot. If this bearish continuation attempt materializes, there is downside risk towards a key support pivot in 2013 around 125.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.