Breakout on the Horizon?
Today this signature currency pair briefly broke above the top end of its week long consolidation range to trade as high as 162.20 in the New York afternoon. No doubt this was on the heels of a late day rally in stocks coupled with the news that Bank of American is in serious acquisition talks with the troubled mortgage lender Countrywide. While the break saw little follow through, the pair has seen a series of higher daily lows the past few trading sessions and as long as we hold above Thursdayâ€™s low of 160.50 the upside in this pair is very much in play. Shorter-term, there is a rising trendline support zone between 160.90-161.20, and should this level hold overnight along with stocks being able to close the week strong on Friday, it could give scope to a larger move towards 164.00 next week.
Looking at the Charts
The daily chart is giving us a bullish 5-open, 5-close simple moving average cross. Oscillators are moving up from oversold conditions after the pair has appeared to have found a base above 160.00. Aggressive medium term traders who hold a bullish view on the EUR/JPY may consider lightly scaling into long positions above Thursday's low of 160.50 and preferably above the aforementioned 160.90-161.20 zone, with a stop below 160.00, targeting 164.00 in the next week. Should stocks be able to extend gains from oversold conditions along with risk aversion taking a back seat for awhile, we may very well see a nice medium term bounce in the EUR/JPY.
Charts Courtesy of FX AccuChart
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