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Forex pairs in this Article » EUR/JPY
By: DailyForex.com

EUR/JPY Analysis

After a long, strong uptrend that has been in force since last summer, the first month of 2014 has seen a pull-back develop into a bearish channel. The large profits may well still be on the long side, but for the time being there is absolutely no reason why good profitable trades cannot be found in both directions. This pair tends to show a lot of momentum at reversals, so it can be a fair pair to fade at turns at significant support and resistance levels.

FOMC Meeting

Tonight at 7pm London time we will see Ben Bernanke’s farewell statement to the market, in which he is expected to announce further tapering amount to a reduction of $10 billion in bond purchases. As this is so crucial to the market’s view of the USD, it may have a strong impact in the reverse direction against the JPY, which could affect the movement in this pair. Nevertheless, at least before the announcement, it is the JPY pairs such as EUR/USD that are likely to provide the best opportunities and some insulation from the expectancy of the noise due tonight.

Technical Analysis

We can start by talking about the long-term charts. The monthly chart shows bullishness, while the weekly chart is showing a moderate to weak bearish retrace is taking place, but is very close to reversing back into bullishness in line with the direction of the primary trend. We can see the key support and resistance levels that are in play right now from examining the daily chart below:

EURJPY Daily 12914

At the moment of writing this, we are sitting on fairly strong resistance at 141.00, which was almost the low of three consecutive days before we broke down through it on Friday. If the level holds, we may well move down back to 140.00. I think it is more likely that the level will eventually break and allow us to move up to the next support at 141.75, which was almost the high of two recent consecutive days. Further above that is last week’s high of 142.40, and then finally a “flipped” zone at around 142.82 which is likely to prove to be strong.

Looking at support below us, we have a zone at around 139.60/75, which saw the low and weekly open this week. It is very close to four daily highs from late November/early December. Below that there is 138.37, which was close to several of the daily lows during that same period.

A good strategy is to wait for the price to reverse direction on the H4 chart after reaching one of these levels, and then looking for a breakout long entry on a shorter timeframe from there.

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