Current Price: 163.32
At all time highs, the EUR/JPY may be breaking out to test upper channel resistance near 167.00. However, long term channel analysis places potential resistance near current price and overbought daily RSI warns of a pullback before the bull trend continues. Either way, we have identified specific levels that would confirm whether or not the EUR/JPY is extending or reversing.
Current Price: 163.32
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Key Levels:
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The weekly chart shows the well defined long term channel that the EURJPY has held in since late 2000. The pair is just above the confluence of the 61.8% extension of 88.94-140.89 / 130.60 (162.71) / midpoint channel line. The area near the midpoint channel line has acted as resistance in the past so we could see a setback before strong buying re-enters the market.
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The daily chart shows the latest move up, which is literally in a straight line from 150.73 to the current price. These are the kind of blow-off moves that lead to reversals. The overbought RSI (daily) along with bearish divergence suggest that we should be on the lookout for a top and reversal. The market may extend higher, as Keynes famously said, “markets can remain irrational far longer than you can remain solvent”?we can not forget that. For this reason, waiting for a daily close below the steep trendline would signal an opportunity to get short against the high. Without a break lower, we have no point of reference from which to get bearish against.
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The 240 minute chart gives us a closer view of the rally from 150.73. We have employed the midpoint technique with the channel again, but on a much smaller scale. A rally above the midpoint would give scope to a breakout to higher levels and, ultimately, a test of the upper channel line close to 167.00. The midpoint line has acted as resistance and support during this move so the line bears watching. Again, a break below the trendline (daily close) signals a bearish opportunity. Initial support would be at 159.55.