Forex Technical Update July 13, 2010  EUR/JPY: Anticipating Counter Trend Breakout

  • Daily: The daily chart shows the EUR/JPY respecting a declining channel resistance. As mentioned in previous updates. Also, there is a bullish divergence followed by a negative reversal, so another downswing can be expected.
  • The decline has so far been weak. We can see that combination of candles is a strong bullish candle followed by a doji and then almost 2 subsequent bearish candles. I say almost, because today candle has not closed, but even if it did, you can see that it would close within the strong bullish candle last week.
  • More confirmation is needed for a reversal back into a declining channel.

  • 4H: The 4H chart shows the rally that has brought the pair from support to resistance of the channel.
  • The bearish outlook is premature because the market may be setting up for another rally. This week started with topping action, and a decline has followed.
  • However, for the bearish outlook, the decline has to break below the rising support. So far the market is respecting the trendline.
  • If the market closes below 110.50, it should signal a bearish attempt. The RSI should also break below 40.
  • The 109.25 area is an important support, seen in the daily as well. This should be the immediate target. If broken, the pair is looking at 107, and then 101.50.
  • One reason to believe the downswing to 101.50 may start now because the market completed abcde waves within the channel, and therefore may have completed the consolidation/correction pattern.

  Fan Yang Currency Analyst Commodity Trading Advisor

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