Forex Technical Update
EUR/JPY 4H Chart 5/7/2012 2:25PM EDT
The EUR/JPY dropped below the 104.60 support pivot, which brought the pair up to the 108.00 level before falling again. It started the 5/7 trading week with a gap downwards in most charts falling to about 103.20 before the market started to fill the gap. By the end of the 5/7 session, the gap is filled, and the oversold condition seen in the 4H chart when the RSI reading fell below 30, is resolved.
The 104.60 level will be a challenge for the current pullback if the market is bearish. A break above 106.00 and the declining trendline, could signal a bullish reversal, or at least a bearish market turning sideways. Note that 61.8% retracement of the 107.98-103.16 swing.
The snapshot suggests that after the pullback, there is still further downside risk.
EUR/USD daily chart 5/7
The daily chart shows that 120.50 is a key level. It is a pivot as well as 61.8% retracement. After the current pullback, this can be the bearish continuation target for now. Note in the daily chart that the RSI reading is now falling below 40, reflecting a loss of the bullish momentum established in the 2012 upswing that ended mid-March. If the RSI pushes below 30 more aggressive targets toward 100, and even 97 will also be in sight.
Fan Yang CMT is a trader, educator and a Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.