Like other yen pairs, the EURJPY enjoyed a long run-up following the November 9th U.S. elections. The cross gained more than 1,000 pips in just 26 trading days.
But what goes up must come down even if only for a brief while. And at the moment, the 120.90 handle looks to be the only thing preventing another 220 pips of downside.
A look back to June of last year shows how the 120.90 area acted as a pivot, first as support and then as resistance. In fact, this was the high for the session that preceded the June 24th Brexit.
The level then became support on December 1st of last year and has continued to act as such during the last six weeks of consolidation.
Note that the December 5th session gapped below 120.90 but never closed below it.
From here I’ll be watching to see how the pair handles 120.90 on a daily closing basis. A close below it followed by a retest as new resistance could offer a favorable selling opportunity for a move toward 118.70.
Alternatively, bullish price action in the form of a pin bar could suggest a move back to the December 2016 high at 124.08.
The most important thing here, in my opinion, is to approach the EURJPY from the daily charts. Any lower time frame will leave you susceptible to false breaks.
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