(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; uptrend lines in green; downtrend line in red; 200-period simple moving average in light blue.)

3/06/2008 – EUR/JPY – There are currently several different dynamics in play on the EUR/JPY daily chart, as shown. On a long-term basis, the currency pair has been entrenched in a very well-defined uptrend since at least mid-2005 (represented on the chart by the bottom green line). On a medium-term basis, the pair has been showing characteristics of a downtrend correction since the long-term peak was hit in July 2007. This downtrend is represented on the chart by the red line. And finally, on a short-term basis, price has been forming a semi-parallel uptrend channel since the end of January 2008. So with a concurrent long-term uptrend, medium-term downtrend, and short-term uptrend, where does a trader look for directional guidance? Since price just recently bounced up decisively off the long-term uptrend line in late January, and also just bounced up off the short-term uptrend line just a few days ago, the directional bias for the near-term appears to be up. This outlook is supported by oscillators like the displayed Stochastics, which have just emerged from oversold and are pointing unmistakably up. If this impending move to the upside indeed occurs as might be expected, the next major resistance resides around the top of the current short-term uptrend channel, and then ultimately at the medium-term downtrend line in red.

James Chen

Chief Technical Analyst

FX Solutions

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