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The price of EURJPY is approaching a key resistance level. But will the trend continue from here, and what price action would we need to see for our bias to be met?
We’re taking a look at EUR/JPY as the price is approaching a major key resistance level.
Weekly timeframe
The overall weekly trend is in a strong uptrend. Last week, we had a bearish close, around 308 pips, to the downside. That was the highest ranging candle we’ve seen from EUR/JPY for quite some time
The price rallied 270 pips in the last three days, so it’s not far off the 300-pip rally from last week. Now, the price is finding support at previous structure highs.
Daily timeframe
In the daily timeframe, the price hit the 130.60 level and formed a strong bullish reaction. However, the price has been forming lower lows and lower highs in the downtrend, showing signs of bearishness as well.
If we want to take a position in the daily downtrend, we want to look for an area to get short in the market. The previous structure lows at 132.70 could act as an area of resistance because the price found support there recently.
We want the price to rally and reject it, so if it forms a bearish engulfing candle or if we get low ranging candlesticks, that could be an opportunity for sellers to come back to the market.
The EUR/JPY bounced from the major swing level of 130.60 and rebounded from the 300-pip fall last week. However, the daily trend is still making lower lows and lower highs. If the price forms a daily bearish candle, we could see the trend continue.
Four-hour timeframe
We can look for a trend continuation using the lower timeframe because when the daily is in a retracement phase back to resistance, the four-hour timeframe will change trend and make higher highs and higher lows.
We can look for the head and shoulders pattern. If the price makes a breakthrough, it comes back down and forms a lower high.
The four-hour timeframe could provide the price action we need to confirm our bias. If the price forms a head and shoulders or a double top pattern, we could look for bearish opportunities.
Alternatively, we could look for a double-top pattern or any change in trend pattern. These would allow us to assume that the daily downtrend will continue and that we could see the price go back down to the 130.60 level.
So, keep an eye on EUR/JPY. It’s approaching a major resistance. If it forms a reversal pattern, look for some downside. If it doesn’t and breaks higher instead, we could see the price rally to the major swing highs.
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