Has EUR/JPY reached the end of its trend?
Check out this reversal chart pattern forming on the pair’s 4-hour time frame while price is inching closer to testing the neckline!
EUR/JPY 4-hour Forex Chart by TradingView
Improving risk sentiment and a not-so-hawkish Bank of Japan (BOJ) announcement last week is helping lift EUR/JPY closer to testing the resistance around the 162.50 minor psychological mark.
This happens to be the neckline of a double bottom pattern visible on the pair’s 4-hour chart, as price has made a couple of failed attempts to break below the 155.00 area over the past two months.
Can EUR/JPY break higher this time?
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. Suppose you haven’t yet done your homework on the euro and Japanese yen, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
The 100 SMA is below the 200 SMA, suggesting that the path of least resistance is still to the downside or that the ceiling near R1 (162.83) is more likely to hold than to break. In this case, look out for another dip back to near-term support zones like the pivot point level (158.99) close to the dynamic inflection points at the moving averages or all the way down to the lows near S1 (156.82).
Then again, EUR/JPY has climbed above both moving averages as an early indicator of a potential shift in trend, so bullish candlesticks closing above the neckline could hint that a reversal is in the cards.
Watch out for a possible uptrend that’s the same height as the reversal pattern or roughly 700 pips while also staying on your toes for a return in selling pressure at the upside targets around R2 (165.00) then R3 (168.84).
Whichever way you decide to play this setup, make sure you practice proper risk management and check out our Currency Correlation tool!