Forex Technical Update

Prev: EUR/JPY Respects 113.50 after an ABC Correction; Bearish Continuation? (7/22)

EUR/JPY
EUR/JPY 7/28/2011 4H chart
Double Top:
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The EUR/JPY in the 4H chart shows a bearish breakout from a recent correction rally. This correction rally failed to kill the bearish momentum; the RSI failed to sustain a break above 60, and fell below 40. A break below 30 can help lessen the chance of a bear trap.
- The 4H chart also shows a double top broken and heading back towards 109.50 lows. A pullback can surely help confirm, but it may not come, or may be muted.
- If there is a pullback, look for 111.65 to provide resistance to confirm topping. Ultimately there should not be a break above 112.00 to confirm a bearish trend.
Looking at 2010, 2011 Lows:
- A break below the recent low near 109.50 should open up 2011 and 2010 lows.
- Looking at the daily chart, the market has respected a break below the 200SMA. The market is bearish in the context of a medium to long-term consolidation that goes back to 2010. The low in 2010 was 105.42, and another major low was 106.82. The 2011 low, which was caused by Japanese Yen repatriation that followed the earthquake in March, was 106.29. These pivots create a large zone to provide support for the current decline.
- We may want to anticipate psychological support at 107.00.
EUR/JPY 7/28/2011 Daily chart

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Fan Yang CMT
Chief Technical Strategist
FXTimes