You are not logged in.

#1 12-01-2022 09:12:04

Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 3200

EUR/JPY: what's going on with the pair?

EUR/JPY: what's going on with the pair?

The EUR/JPY has been trading in a narrow range since May. 134 and 128 offer strong resistance and support levels respectively, while the round number 130 acts as a pivot level.

One of the most interesting technical setups in recent months comes from the EUR/JPY cross. For technical traders, the ranges offer buying and selling opportunities against support, respectively resistance. If the range forms around a round level, they are even more interesting as the range conditions usually last longer.

Early last summer, it peaked at 134. 2021 was an excellent year for JPY bears, as JPY pairs rallied strongly.

But after breaking 130 for the first time, the round level has attracted price action repeatedly and will likely do so in the future. As such, we can define a trading range where 134 acts as resistance and 128 as support.

A bearish EUR/JPY setup favoured
The cross has bounced off the 128 support area three times in a row. Above 130, it is bullish with no resistance until the upper edge of the above mentioned range. However, a move below 130 suggests that another attempt at 128 is in the cards.

In other words, the EUR/JPY 128-134 range will hold unless price falls below 130. Although above, buyers still have a chance to push the pair to new higher highs. On the other hand, a daily close below 130 is asking for trouble for the bulls, while another attempt at 128 comes next.

JPY remains correlated to US equities
One of the main drivers of JPY weakness last year was the strength of the U.S. stock market. The JPY is inversely correlated to the U.S. stock market - it falls when stocks rise and rises when stocks fall.

As such, a sharp move below 128 indicates weakness in the stock market. In addition, a March rate hike is in the cards now that the Federal Reserve is preparing to tighten monetary policy. If the Fed tightens more quickly or suggests that it would, the stock market will have a hard time moving forward.

"Anything worth having is worth going for - all the way." - J.R. Ewing



Board footer