Forex Technical Update
EUR/JPY 1H Chart 8/28/2012 7:55AM EDT
The EUR/JPY has been trading in a declining wedge since finding resistance at 99.17 last week. The 1H chart shows the wedge completing a 5-wave count (abcde), a conventional count for a wedge based on Elliott Wave Principles. The 1H RSI reading, which has been held under 60 throughout the formation of the wedge, has broken above 60, signaling loss of bearish momentum in the near-term. If the market can climb above the 98.82 resistance pivot, it will likely focus on the 99.17/20 area during the 8/28 US session.
The 4H chart shows the market anchoring out of a small channel, but is still within a larger one. The bullish momentum during the formation of this larger rising channel was maintained, as the 4H RSI remains above 40. A push above 60 should reflect bullish continuation. The bearish scenario is shelved until a break below the rising channel support, which probably requires clearing below 97.50.
Sticking with the current bullish trend in the short to medium term, the next level to monitor if the market pushes above the 99.20 resistance area, is the psychological handle at 100.00, above which the market focuses on the 101.35-101.60 resistance from June's consolidation.
If the market can't clear 99.20, and hold below 99.00 for example, watch out for the possibility of further consolidation/correction. The completed wedge in this scenario would have just been the completion of an initial corrective wave (A). This outlook puts the focus on the rising channel support and the 97.40-50 area.
EUR/JPY 4H Chart 8/28/2012 8:00AM 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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