EUR/JPY Threatening a Key Trendline from 2012

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EUR/JPY Threatening a Key Trendline from 2012

Neutral mode turning bearish in 2014:
EUR/JPY has been bullish since the 2012-low at 94.10. After a high of 145.69 however, the pair has consolidated, and is turning bearish as price this week worked down to a fresh low on the year.

Engulfing Candle:
This week’s candle is engulfing the last 2-week’s candles which represented a brief consolidation against the prevailing bearish trend over the past few months. Essentially, if this week’s candle closed now, it would signal bearish continuation.

Slingshot:
Note that price has crossed below the 50-week SMA, and this week’s price action respected it as resistance, creating a “slingshot” signal for the bearish outlook.

Lost Momentum:
The weekly RSI reading is falling below 40, which is a sign that the prevailing bullish momentum is lost.

Rising Trendline:
Price is now threatening a rising trendline that comes up from the 2012-low of 94.10. A break below 135 should clear this trendline support. With the above mentioned bearish signs weighing on the EUR/JPY, it looks ready to break this key support factor.

If it does, it will expose the next key support pivot around 131.12.

EUR/JPY Weekly Chart
eurjpy weekly chart 8/8

(click to enlarge)

Failure: 
This week’s price action is one that signals bearish continuation and threatens a key trendline. Thus, if price fails to break the trendline and climbs back above this and really last week’s highs around 138, then we are likely seeing a bullish continuation, or at least a failed bearish correction, which can turn into a sideways consolidation mode if not a bullish continuation.

EUR/JPY Daily Chart (8/8)
eurjpy 8/8 daily chart

(click to enlarge)

In the daily chart, you can see the importance of 138. A break above that would indeed kill the pattern of lower highs and lower lows seen since April. It would also clearly break above a falling wedge forming since May. Furthermore, a break above 138 puts EUR/JPY back above the 50-day SMA.

Another clue that the bearish trend is over would be if the daily RSI climbs back above 60.

It seems like a tall order for the bullish outlook, while the current bearish pressure looks strong going against the rising trendline from 2012. If we get a pullback towards 137.50, be ready for sellers to pull EUR/JPY towards the rising trendline again.

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