EUR/USD Continues to Bleed; EUR/JPY Awaiting Breakout

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EUR/USD Continues to Bleed; EUR/JPY Awaiting Breakout

EUR/USD

EUR/USD fell sharply last week after the ECB announced surprise rate cuts and signaled further stimulus to come. It’s a double whammy for EUR/USD because the greenback also gained across the board. Then we had a brief consolidation on Friday after a poor NPF print of 142K.  However, this was a very short-lived consolidation, and traders faded EUR/USD below 1.29 during the 9/8 session. As we get in the 9/9 US session, EUR/USD has 1.2860 and is showing signs for an intra-session consolidation, or bullish correction.

EUR/USD 4H Chart 9/9
eurusd 4h chart 9/9

(click to enlarge)

1) The last 3 4H-candles form a classic reversal combination.
2) This candlestick combination pattern is occurring with a bullish divergence between price and the RSI reading, which is in oversold territory.

We can expect some near-term bullish attempt, but it might be limited to within the trading session, and sellers are likely to be defending the 1.2950 level, which was the middle of the last week’s consolidation.A break above 1.30 would establish a meaningful consolidation mode for the short to medium term. Otherwise, there is still downside risk towards a common low between April and July 2013 in the 1.2745-1.28 area.

EUR/USD Weekly Chart 
eurusd weekly chart 9/9

(click to enlarge)

EUR/JPY

The story for EUR/JPY is that it has been trading in somewhat of a descending triangle throughout 2014. The daily chart shows a common support around 136, while the highs continue to drift lower. At this point price is trading below the 200-, 100-, and 50-day SMAs, and the RSI has tagged 30 while staying below 60 for the most part. This shows bearish bias as price action threatens the descending triangle support.

A break below 135.70 should open up a bearish outlook that has the common lows in October and November 2013 in sight – around 131-131.20.

A clear break above 138.00 will be needed to shelve the bearish outlook. Note that there was an attempt last week that failed to stay above 138. This failed bullish attempt can be interpreted as a bearish signal, so we should brace for a breakout.

EUR/JPY Daily Chart 9/9
eurjpy daily chart 9/9

(click to enlarge)

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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.