Forex Technical Update
EUR/JPY Daily Chart 9/16/2012 7:50PM EDT
Strong break: The EUR/JPY broke some key resistance factors last Friday (9/16). The pair starts this week sitting just under the 103.00 handle after breaking above 101.65 , the resistance from a consolidation period in June. The EUR/JPY's upside breakout also clears the 200-day SMA and established the strongest 1-day candle from open to close in 2012 so far.
Anticipating Correction: There are signs that the market may still have some more juice to the upside, but in the very short-term, the EUR/JPY might be slightly overbought. It should be noted that the 2nd strongest open-close 1-day rally was on 2/23, which was followed by a week of corrective decline before a capitulating push higher.
If there is a throwback, the 101.35-101.65 area might be considered support. I think there can be a pullback toward 100.65 within the bullish scenario, but below that, the bullish outlook becomes doubtful. (100.65 can be seen in the 4H chart as an intra-day resistance pivot.) However, there is not bearish signal until a break below the rising trendline seen in the daily chart, which probably requires at least clearing below the 100.00 psychological handle.
Upside targets: As the market extends higher, the first level to monitor is in the 104.60-104.85 area that includes a previous support pivot, and the 61.8% retracement of the 111.43-94.13 downswing from late March through late July. If the market clears above 105 handle, the next target could be in the 107.75-108.00 area, which include the 78.6% retracement and a previous resistance pivot.
EUR/JPY 4H Chart 9/16/2012 7:40PM EDT
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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