Chart of the day - EUR/JPY at major support zone where a minor recovery may materialize

Potential short-term recovery for EUR/JPY

Short-term technical outlook on EUR/JPY (Wed, 30 May)



Key technical elements

  • The recent tumble of 9% (1288 pips) from its high of 137.50 printed on 02 Feb 2018 to yesterday, 29 May low of 124.60 has reached a major support zone.
  • The major support zone of 124.60/123.35 is defined by a confluence of elements. The lower boundary of a primary ascending channel from 24 Jun 2016 low, the former swing high areas of 12 Dec 2016/23 Jan 2017, the lower boundary of a medium-term descending channel from 02 Feb 2018 high and a Fibonacci cluster (the 50% Fibonacci retracement of the multi-year up move from 24 Jun 2016 low to 02 Feb 2018 high & the 1.00 Fibonacci projection from the recent decline from 02 Feb 2018 high to 19 Mar 2018 low projected from 23 Apr 2018 high) (see weekly & hourly charts).
  •  The hourly RSI oscillator has traced out a bullish divergence signal and remains positive above is corresponding support at the 40% level. These observations suggest that the recent downside momentum of price action has abated.
  • The significant short-term resistances stand at 127.20 (former minor swing low area of 25 May 2018 & 38.2% Fibonacci retracement of the decline from 02 Feb high to 29 May 2018 low) follow by 128.50 (minor swing high areas of 25/28 May 2018 & close to 61.8% Fibonacci retracement of the decline from 02 Feb high to 29 May 2018 low.

Key Levels (1 to 3 days)

Intermediate support: 125.50

Pivot (key support): 124.60

Resistances: 127.20 & 128.50

Next support: 123.35 (lower limit of the major support zone)

Conclusion

Therefore, the EUR/JPY may see a short-term recovery to target the short-term resistance at 127.20 if the 124.60 support is able to hold for today.

Failure to hold at 124.60 sees a further extension of the down move towards the lower limit of the major support zone at 123.35.

Charts are from eSignal



Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.