- EUR/JPY approaching key support confluence ahead of ECB
- Short-bias at risk above 112.26
- Updated targets & invalidation levels
Chart Created Using TradingView
Technical Outlook : EURJPY has been in consolidation since the June 24 th Brexit sell-off with the pair now eyeing key confluence support after reversing off yearly trendline resistance earlier in the month. The support zone extends into the September low-day close at 112.26 - a break below this key region shifts the focus to the July low at 110.82 and the 2016 low at 109.21 .
Heading into tomorrow's highly anticipated European Central Bank (ECB) rate decision, the short-bias is at risk as the pair approaches this support zone with key resistance eyed back at the 2016 trendline which converges on the 100-day moving average around 115.05/10 . A close above 116.03 would be needed to shift the broader focus back to the long-side.
Notes : The p air has been following this embedded slope off the monthly high with the lower parallels highlighting near-term support at 112.98 and 112.60 - both areas of interest for exhaustion / possible long-entries. A break below 112.26 keeps the short-bias in focus.
Interim resistance now stands at the monthly open / 61.8% retracement at 113.63/68 backed by 114.18 and the upper parallels which converge on the weekly open at 114.46 (near-term bearish invalidation). From a trading standpoint, I would be looking for a reaction down at structural support with a breach of this near-term formation targeting subsequent topside objectives at 115.05 & trendline resistance extending off the July high currently ~ 115.75 . For the complete setup and to continue tracking this trade & more throughout the week- Subscribe to SB Trade Desk .
- A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net long EURJPY - the ratio stands at +1.03 ( 51 % of traders are long)- weak bearish reading
- Long positions are 30.0 % above levels seen last week while short positions are 8.1% lower over the same time period.
- Open interest remains lackluster at 7.1% below its monthly average
- Note that SSI reached an extreme of 1.6 on September 21 st as the exchange rate was registering a low. I would be looking for a build in long-positioning as the pair approaches support with such a scenario risking a near-term exhaustion low.
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---Written by Michael Boutros, Currency Strategist with DailyFX
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