EUR/JPY Respects Key Support; GBP/JPY Signals Bullish Continuation

EUR/JPY Respects Key Support; GBP/JPY Signals Bullish Continuation

It has not been a good start for the JPY. We saw the USD/JPY push into 8-year highs and we are seeing bullish price action in the EUR/JPY and GBP/JPY as well.

EUR/JPY 4H Chart 5/26
eurjpy 4h chart 5/26
(click to enlarge)

The EUR/JPY rallied from 126.09 in April to a high of 136.96 before stalling. The 4H chart shows price retreating below the 100-, and 50-period SMA with the RSI breaking below 40. These are signs that the pair has shifted from a bullish mode into a neutral one.

A break below 133.10 would shift the EUR/JPY into a bearish market. However as we start the week traders respected the 133.10 support. Now to the upside, a break above at least 134.50 would be needed to clear a falling trendline from last week. A break above 134.80 would then clear above the 100-, and 50-period SMAs and open up the bullish scenario towards the 136.96-137 area. Then, if price can anchor above 135, EUR/JPY could would signal a bullish continuation scenario and the 137 area would become vulnerable. Above that, we should look towards the 140 psychological level.

While the EUR/JPY rally today prevented it from turning bearish, a rally in GBP/JPY is signaling bullish continuation.

GBP/JPY 4H Chart 5/26
gbpjpy 4h chart 5/26

(click to enlarge)

The 4H GBP/JPY chart shows that price is holding above the 50-, 100-, and 200-period SMAs, which are sloping up and in bullish alignment. Also note that the RSI has held above 40 for the most part after tagging above 70 earlier in the month. Last week, GBP/JPY broke above a consolidation range formed in the week before that. GBP/JPY broke the 2014 high into a 7-year high around 190.Towards the end of the week, we saw a pullback that found support around 187.50, which showed respect of the broken range. We basically have a confirmation for the bullish continuation scenario. Now, the psychological level of 200 will be in sight.

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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