Forex Technical Update

Prev: EUR/JPY in a Double Bottom Attempt Targeting 110.60 but Bearish Inclination Remains (8/10)

EUR/JPY
EUR/JPY 8/15/2011 1H Chart
ABC After Triple Bottom:
- Instead of a double bottom, the EUR/JPY was seen in a triple bottom in the 1H chart.
- From another perspective, the market is developing an ABC correction, and at the moment, C=A near 110.25
- Note also that the market is right under the 200SMA and right around the 61.8% retracement level.
- The RSI reading in the 1H chart cracked 60, but hasn't sustained the break above it yet. The bearish momentum is being challenged by the current correction rally, but this rally is also now seeing resistance.
109.50 Support:
- If the market remains above the 109.50 level in the US session, it has a good chance to break to the upside of a flag pattern that may be developing.
- The break below 109.50 however opens up lower pivots at 108.70, 108.00 before targeting the 2011, 2010 lows of 106.29, and 105.42 respectively.
Flag and Upside Risk:
- The EUR/JPY continues to look bearish, but a continuation to the upside whether or not a flag pattern even forms opens up with a close above 110.30.
- If the US session trades with risk appetite, the EUR/JPY may have a chance to rally towards 111.20.
- The thing is, there aren't any significant releases in the US session so watch for 111.00 as a whole number resistance as well.
- In the bullish scenario the 1H RSI reading should break above 70.
Long-term ABC in Daily
- The daily chart shows a completion of a large ABC correction.
- The decline has made the RSI kiss the 30 level, but now we have an extended bullish divergence.
- Here, a longer term correction rally has upside towards 113.50-114.00, near the 200SMA and previous pivot.  A break above 114.00 and the projected declining resistance can open up the bullish scenario in the medium to long term towards the 118 and 123 highs.
EUR/JPY 8/15/2011 Daily Chart

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Fan Yang CMT
Chief Technical Strategist
FXTimes