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EURJPY Range Break Opens the Door to 136.80

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EURJPY bulls have cleared the three-month range resistance at 134.35. The level has capped every advance since September 21, and Wednesday’s close means buyers should now defend it as support.

However, the price is a bit overextended at current levels. Whenever a market gets too far away from the 10 and 20 EMAs on the daily chart, a retracement or at least some consolidation usually isn’t far behind.

With that in mind, we could see the EURJPY move sideways for a day or two before the next leg higher. There are no guarantees, but that’s my best guess given the distance between the mean and Wednesday’s close.

I will also want to see some bullish price action on a retest of the 134.35 area. As mentioned in recent posts, the lack of liquidity this time of year can make things tricky. One way around that is to require confirming price action in the form of a bullish pin bar.

As for resistance, the next key level doesn’t come in until 136.80. The area was a critical factor between May and October of 2015. It’s also 245 pips from the 134.35 handle, which matches the range that has directed price action for the past three months.

Alternatively, a daily close at 5 pm EST back below 134.35 would negate the bullish scenario. It would also re-expose former range support at 131.80.

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EURJPY range on daily chart

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11 comments
Cherie says

Thank you Justin! I’ve been watching this pair for quite some time and finally got a signal using my strategy to go long yesterday..shall see what happens 🙂

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saibu says

We need to allow price to move far from the range resistance before conforming that the range has been broken

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TripTrap says

Hi Justin, was hoping you would comment on this pair!
Yes, would be very surprised if the banks don’t spike price back down hard into support (which until recently was resistance) to stop out the weak longs. Still 4 hours until the 5pm ET close but looks like we are setting up for a small daily range today, maybe a doji and ripe for a spike back down tomorrow before perhaps heading higher. Oanda position ratios are quite bearish (meaning bullish) on this pair and bodes well for longer term higher prices. Thank you for that 136.80 target / resistance level. Very helpful…

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    TripTrap says

    Sure enough….the big bad bank wolves came a calling tonight and spiked EurJpy down to 133.898 taking out I am sure a boat load of stops. Hopefully that clears the way for the next leg higher and will be confirmed IF we close above Justin’s critical support / resistance that he pointed out at 134.35 at 5pm ET Friday….

    Reply
OLUSOLA BOLAJI says

please what is the significance the 10 and 20EMA.why do we use them

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Hal says

Interesting. In my fund during low liquidity times or when there are significant international issues I never long pairs like the Euro/JPY. Even if price action is favorable pairs like this can have significant downside risks that I prefer to avoid. Cheers.

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    TripTrap says

    Yes…agree this is a humbling business and caution should be the rule. However this pair and the UsdJpy could lead to significant moves to the upside as they break out of their long coiling sideways patterns. I make sure a good hedge strategy is in place in case all hell breaks loose. Limiting risk is the name of the game but of course nothing is full proof.
    Good trading to you…

    Reply
Albert Sim says

Have your attention on all the 7 JPY pairs……… the SPRING season of the Orient is just round the corner…… 😎

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    TripTrap says

    Ha! Yes, absolutely…my attention is laser focused on the pairs!! Sushi is for dinner tonight 🙂

    Reply
Geniusbami says

Yes! The strength of yesterday’s bullish move confirms the range is over. However, as you mentioned that “we could see the EURJPY move sideways for a day or two before the next leg higher”, two conditions are already in place to confirm that:

1. Price closed right on the 61.8% Fibo level from Dec 07, 2014 and
2. Sub H4 mean.

I expect the bears to put up their last fight before the bullish tsunami commences.

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