By Greg Holden – The recovery of the euro appears to have gotten underway, with previous psychological barriers being broken daily this week. We’ve already seen breaches on the EUR/USD, EUR/CHF, and the EUR/CAD; it appears like we now have a breakout forming on the EUR/JPY as well.
This pair was flat for a number of months, but appears, as of the past week, to have broken out of its sideways trading behavior and is climbing higher.
Technical Analysis
– The chart below is the EUR/JPY daily chart provided by ForexYard. The indicators shown are the Relative Strength Index (RSI), MACD/OsMA, and Fibonacci retracement lines were drawn.
– As we can see in the chart, the price is currently testing the 23.6% Fibonacci retracement level and may possess the momentum to break past, as per our indicators and general market news.
– Both the RSI and MACD are floating in neutral territory, but within a clear upward channel. While this doesn’t provide us with the strongest indication of direction, it gives us an idea of the statistically average movement. More importantly, it does not give us an indication that it will correct downward and re-enter the flat trading range.
– Fundamentally speaking, the euro zone has recently seen a wave of bank stress tests which regional banks appear to have no problem passing. Sentiment throughout Europe is improving and the euro is climbing steadily as a result. This has led to a boost in risk appetite which drives typical safe-havens (such as the JPY) downward.
– If we see the price break through the 23.6% level, priced at 114.75, we may expect to see the price rising towards the next significant level at the 38.2% line, with a price target just below 120.00. For those interested, that’s 500+ pips of profit with the proper trade!
EUR/JPY – Daily Chart
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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