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.
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.
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.
The weekly RSI reading is falling below 40, which is a sign that the prevailing bullish momentum is lost.
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.
(click to enlarge)
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.
(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.
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