Has the EUR/JPY reached the end of its trend?
Check out the reversal chart pattern forming on the pair’s 4-hour time frame as the price approaches a test of the neckline!
EUR/JPY for 4 hours Chart by TradingView
Improving risk appetite and a softer BoJ announcement last week helped lift EUR/JPY closer to testing resistance around the minor psychological level of 162.50.
This happens to be the neckline of the double bottom pattern appearing on the pair’s 4-hour chart, where the price has made two failed attempts to break below the 155.00 area over the past two months.
Can EUR/JPY go higher this time?
Remember that directional biases and volatility conditions in market prices are usually driven by fundamentals. Assuming you haven’t done your homework on the EUR and JPY yet, it’s time to check the economic calendar and stay up to date with daily essential news!
The 100 SMA is below the 200 SMA, indicating that the path of least resistance remains to the downside or that the ceiling near R1 (162.83) is more likely to hold than to break. In this case, look for another pullback to near-term support areas such as the pivot point level (158.99) near the dynamic inflection points at the moving averages or all the way down to the lows near S1 (156.82).
Once again, the EUR/JPY pair has risen above both moving averages as an early indicator of a potential trend shift, so closing bullish candles above the neckline could indicate that a reversal is likely.
Watch for a potential uptrend that is the same high as the reversal pattern or closer to 700 pips while also staying on your toes for a return to selling pressure at upside targets around R2 (165.00) then R3 (168.84).
Whichever way you decide to run this setup, be sure to practice proper risk management and check out our currency correlation tool!