The EUR/JPY pair is at the crossroad in the 4H chart. IT is showing a bearish attempt that could liberate the pair into its prevailing bearish trend. You can see price hold below the 138 handle, which was also where the 200-period SMA was in the 4H chart.
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However when we look at the 4H chart, we do see an inverted head and shoulders aka. Kilroy pattern, which has not been tested yet as support. If price can hold above 137.25, and the 4H RSI holds above 40, we could be in for further upside risk, especially if this is the case after the ECB event risk on Thursday. Though I think we should give it some elbow space because price action can be volatile around the risk event. For example if price dips to 137 but still comes back above 137.25, that should still be a sign that the Kilroy is holding as support, and the upside would be toward 138, and possibly toward the next resistance pivot around 138.40.
When you look at the daily chart, you can see that the “trend” in 2014 is bearish. I put trend in quotation because while the bias is bearish and the momentum is bearish, the structure does not look it. Still, only a break above 139.00 with the daily RSI pushing above 60 should shelve the bearish outlook. But a break above 140, with the daily RSI pushing to 70 would be a strong bullish continuation sign – continuation of the 2013 uptrend.
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In the daily chart, you can see that a break above 140 would clear above the 200-, and 100-day SMAs as well as the falling trendline from the Dec. 26 high of 145.70. The break would basically expose that 145.70 high.
Otherwise, with price below 139, the bias is still towardsthe 2014-low at 136.22, and possibly lower.
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