The EURJPY has been moving sideways since the June 24th Brexit. In fact, the pair has yet to break the single session range that saw a high of 122.00 and a low of 109.22. Granted, at nearly 1,300 pips, it’s quite the range.
But despite the lack of follow through, there may be an opportunity brewing just above the 114.00 handle.
The risk-sensitive pair began the month of October on a bullish note. Not only did buyers push the price above 114.00 on October 4th, but they also furthered their efforts the very next day with a close above trend line resistance that extends from the July high at 118.45.
We can even see where the pair tested former resistance as new support on October 7th. But these gains were short-lived as sellers closed the pair back below the level this past Monday, carving out a bearish engulfing day in the process.
At the moment, the bullish break earlier this month looks to be false. In which case we can keep an eye out for selling opportunities but only if we see further weakness from current levels.
As I’ve mentioned in the past, a false break to one side of a level can often lead to an extended move in the opposite direction. This isn’t always the case, but in my experience, it happens more often than not.
So why am I interested in a pair that has essentially gone nowhere since late June?
It’s simple really. The 114.00 area served as support at the end of July and early August and has since flipped between acting as support and resistance four times. So there’s no doubt that this is a critical level to keep an eye on.
On top of that, the last two closes below the 114.00 handle have resulted in a retest of the 112.30 region. And given the recent (supposed) false break, I have greater reason to believe that the next breakdown could have legs.
Keep in mind that the pair could also catch a bid near 113.00, which would be the trend line that extends from the post-Brexit low. But we can cross that bridge when and if we get there.
We’ll have to wait until next week for the resolution, but this one has certainly earned a spot on my watch list.
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