EUR/JPY may have its five day winning streaked snapped as price continues to respect the 200-day SMA, which is around the 138.79 and also the 50.0% Fibonacci retracement of the June high to low move. This rise occurred after the spotlight regarding the ECB’s stimulus took a backseat towards the focus on the U.S. Federal Reserve pledging to maintain its accommodative policy stance. The rally on the euro was mainly triggered due to a weakening U.S. dollar and traders may see the focus come back to Europe on Monday when German and French Manufacturing PMI are released. Weaker prints have been coming out of Europe and may possibly help return the pressure back on the euro.
The daily chart of EUR/JPY shows that since a key high was achieved at 145.67 last December, a violent selloff saw price fall all the way down to 135. Since that collapse, price has steadily made lower highs and lower lows. Price is also definitely exhibiting signs of losing bullish momentum as we are getting close to see weekly candles touch the 50-week SMA (137.32), which has not been tested since last October. Major support will come from the 134.00 area, which could also signal the formation of a bullish Gartley pattern. To the upside 140 is key resistance with 143.70 providing major resistance.
The trade: Sell EUR/JPY 138.75 with a stop loss at 139.75 and a take profit at 136.75. The Risk/Reward Ratio is 1:2.
Edward J. Moya
WorldWideMarkets Online Trading