On August 9th we looked at the EURJPY. More specifically, we were interested in the 128.40 handle along with former channel resistance near 127.00/30.
Since that time, the pair has continued to hold above 128.40 on a daily closing (5 pm EST) basis. Those trying to sell the intraday breaks below the level continue to get caught on the wrong side of the market.
Because the price is now just 115 pips above former channel resistance, I’m no longer interested in a break of 128.40. Even if we do get a daily close below the level, securing a favorable risk to reward ratio on a short position would be next to impossible.
Instead, I’m going to stay on the sideline until sellers manage a daily close below former channel support, which is now closer to 127.40/60. A look at the bigger picture shows how this channel was a key influence between September of 2016 and May of this year.
Knowing that this former resistance level played a significant role earlier this year, a close back below it would be a sign that buyers are exhausted. It could also set up a favorable opportunity to get short.
At the same time, bullish price action on a retest of the 127.40/60 area would indicate that buyers intend to respect former resistance as new support. My one reservation with the idea of going long is the fact that other yen pairs have shown considerable strength in recent weeks.
I’m going to hold off on doing anything until I see how market participants react at 127.40/60. A daily close below the area would expose the May highs at 125.80. If the pair doesn’t retest 127.40/60, I will stand aside and look elsewhere for a more favorable opportunity.
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