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EUR/JPY Technical Analysis: A Sliding Scale of Support
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Talking Points:
EUR/JPY Technical Strategy: Long-term still in down-trend; short-term bullish reversal in question.
EUR/JPY has returned to the familiar trend-line we discussed in our last article. Old resistance is still showing as support.
Tomorrow’s European Central Bank meeting can roil price action; traders are going to want to be careful here.
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In our last article, we looked at a prior resistance trend-line beginning to show up as support in EUR/JPY. And this is still happening, albeit at lower prices than when the bullish bounce first came-in last week. At this point, EUR/JPY is appearing to slide deeper down this downward sloping trend-line towards lower support values. But the very fact that old resistance is continuing to show some element of support can continue to substantiate a bullish case in search of a ‘bigger picture’ reversal.
Of specific interest to the bullish case in EUR/JPY is the zone of confluent support around the 112.00-handle. This zone had showed up for support for two months in EUR/JPY, and price action has been unable to trade below since July 11th, which is when Shinzo Abe’s coalition win in the upper-house of Japanese Parliament gave the impression that larger QE efforts may be in store for the Yen.
Tomorrow brings a pivotal ECB meeting in which many are expecting the bank to discuss their QE-efforts; and this can bring considerable volatility into Euro-pairs. Of specific interest in EUR/JPY is whether or not a point of ‘higher low’ support can be substantiated above the prior swing low near the 112.25-level. If support can be established, the bullish case becomes considerably more attractive.
Chart prepared by James Stanley
--- Written by James Stanley, Analyst for DailyFX.com
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