Bullish Break; Confirmation Needed:
In September, EUR/JPY rallies from a low of 135.80 to 141.21 before retreating. The 4H chart shows the pair falling to 138.38, right around the middle of the September-rally. Then we got a double bottom last week, from which, price rallied to break above a falling trendline. The 139.00 level is still acting as resistance, so even though the double bottom is complete, we need further confirmation of a price bottom before we can say EUR/JPY is in a bullish market. A close above 139 could be that bullish continuation signal.
(click to enlarge)
Technical Conditions and Outlook:
Looking at the 4H chart, although price action a the RSI reading has shown a loss of bullish bias and momentum, we should say that there is no real bearish signal yet. A break below 138.00 with the 4H RSI pushing below 30 would be such a bearish signal. For now, the bias remains bullish in this time-frame, so if price can clear abov the 50-period simple moving average (SMA), at 139.50, the case for bullish continuation would be even stronger, with upside first to 140.20, then the 141.21 high, with potentially further upside.
Bullish Continuation Breakout in a higher time-frame:
The theory for further upside stems from the technical picture in daily chart. In this time-frame, we can see that the September rally itself was a bullish continuation signal. It completed a double bottom, and broke above the falling trendline as well as the 200-, 100-, and 50-day SMAs. The daily RSI tagged 70 showing some initial bullish momentum after consolidating throughout most of 2014.
Confirmation and Bullish Outlook:
The current pullback is a test of the September breakout. As mentioned before 138 could be a key level. If price can hold above 138, and push back above 140, it would be a bullish slingshot signal, showing respect to the 100 and 50-day SMAs as support. Also, if the daily RSI holds above 40, the bullish momentum from September is still in play.
We can see that if price extends above the 141.21 high, there is room to run until some common resistance in the 143-143.50 area, then the 145.69 high on the year.
(click to enlarge)
a break below 137.50 would clear below the SMAs. If the daily RSI also drops below 40, EUR/JPY should still be in consolidation.
Previous Post by Author: Gold Uncoiling, Silver Testing Support