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.