In mid-April, the EURJPY embarked on one of the more aggressive rallies within the last few years. It took just 22 trading days for the pair to gain 1,100 pips.
But that may be coming to an end, at least temporarily. Since topping out at 125.80, buyers have struggled to do anything more than tread water, and the consolidation thus far doesn’t look very constructive.
Some may argue that the mid-April rally is impulsive and recent price action is therefore corrective and mostly bullish. However, I’d argue that the EURJPY has made a habit of carving out aggressive rallies only to give it all right back.
Take the weekly chart below which illustrates several cases like the one I just described.
While it’s an interesting observation, this pattern doesn’t mean that the most recent rally will fall victim to the same trend. It does, however, somewhat refute the argument that this latest push is the beginning of a larger bull move. Recent price action would disagree with that notion.
To get a better idea of where the EURJPY may be heading in the near-term, we turn to the daily chart. What stands out most to me is the 123.60 handle. Although it has allowed some intraday breakdowns, the pair has held the level on a daily closing basis since May 5th.
You’ll also notice that the 123.60 area previously served as resistance during December of last year and once on January 9th. This then appears to be the line in the sand between buyers and sellers.
There is also a trend line that extends from the May 18th low which intersects with the 123.60 level. The confluence of support makes any subsequent breakdown that much more significant and devastating for buyers.
Why not buy at 123.60 instead?
You could, but last week’s lower high at 125.30 coupled with the double top at 125.80 could continue to weigh on buyers this week. As always, time will tell.
In summary, I’ll be interested in a selling opportunity should the EURJPY break the 123.60 area on a daily closing basis. Below that, key support comes in at 122.60 followed by 121.70 and 120.35.
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