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EURJPY Shows Signs of Cracking, Downtrend Resuming?

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It’s no secret that EURJPY has been stuck in a downtrend for some time now. The series of lower highs followed by lower lows since June 2015 has been relentless. And if yesterday’s price action is any indication, the bearish momentum isn’t about to let up anytime soon.

The daily chart below illustrates the downward ebb and flow that has persisted for the last ten months.

EURJPY downtrend

Although the 125.30 handle prevented the pair from sliding even lower during yesterday’s session, there was a critical break that should be cause for concern for anyone with a bullish bias.

The level in question is trend line support that extends from the March low at 122.05. This level previously supported prices on the 9th and 22nd of March and should, therefore, act as resistance if tested as such over the coming sessions.

On the other hand, if the strength of the Japanese yen continues at its current pace, the chances are slim that we’ll see a move that high before the next leg down. For this reason, I’m partial to using the 125.30 level a way to identify a favorable opportunity to get short.

However, keep in mind that trading a break on the 4-hour chart is inherently more risky than waiting for a daily close below the level. Although EURJPY has respected 125.30 on a 4-hour basis fairly well in recent weeks, there was a false break on March 22nd.

As always, the way you choose to trade these levels is dependent upon your style of trading and overall tolerance for risk.

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EURJPY key levels on the 4-hour chart

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