(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; uptrend lines in green; downtrend line in red; 50-period simple moving average in light blue.)
4/30/2008 – EUR/JPY – As noted on a previous Chart of the Day last week, the EUR/JPY Weekly chart, as shown, is displaying classic technical signs of a long-term consolidation with progressively diminishing volatility. The current consolidation can be viewed as akin to a large symmetric triangle formation. The last touch of the top resistance area of the triangle occurred just last week, and the prompt bounce back down signified the strength of this resistance. Since the EUR/JPY has been entrenched in a very long-term uptrend, and triangles are often considered continuation patterns, technical traders are looking for any breakout above triangle resistance (represented by the red line) with follow-through. In this event, long trades can look to target major resistance to the upside in the region of the long-term high around 169.00. Oscillators like the displayed Stochastics, however, are lending strength to a continuation of the bounce back down into the middle of the triangle, as price is currently well in overbought territory. In this event, major support resides in the 159.50 region, which coincides approximately with a key 38.2% Fibonacci retracement level. At the same time, however, there is certainly more of a technical bias to the upside if in fact price manages to breakout above triangle resistance.
Chief Technical Analyst
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