• Last Candlesticks pattern: Window
• Time of formation: 24 April 2017
• Trend bias: Up
• Last Candlesticks pattern: Hammer
• Time of formation: 18 May 2017
• Trend bias: Up
EUR/JPY – 128.45
Although the single currency extended recent upmove and rose to as high as 131.40 last week, the subsequent sharp retreat suggests a temporary top has possibly been formed there, hence consolidation with mild downside bias is seen for retracement of recent upmove to 127.95-00 (38.2% Fibonacci retracement of 122.38-131.40), then 127.40-45 support, however, near term oversold condition should limit downside to 126.85-90 (50% Fibonacci retracement) and price should stay above the upper Kumo (now at 126.15), bring rebound later.
On the upside, whilst recovery to 128.90-00 cannot be ruled out, reckon 129.55-60 would limit upside and bring another decline later. A daily close above the Tenkan-Sen (now at 129.81) would defer and suggest 1st leg of decline from 131.40 top has ended instead, risk a stronger rebound to 130.00, then 130.40-50 but resistance at 130.83 should hold, bring another decline later. A break above this level would suggest pullback from 131.40 has ended and bring retest of this level but only break there would revive bullishness and extend recent upmove to 132.00, then towards previous resistance at 132.33.
Recommendation: Exit long entered at 128.65 and turn short at 129.50 for 127.00 with stop above 130.50
On the weekly chart, despite last week’s marginal rise to 131.40, this week’s sharp retreat looks set to form a black candlestick, suggesting consolidation below this level would be seen and downside risk is for correction to 128.00, then test of the Tenkan-Sen (now at 126.90), however, a weekly close below there is needed to signal a temporary top is formed, bring retracement of recent upmove to 126.40-50 but previous resistance at 125.81 should turn into support and limit euro’s downside, reckon 124.50 would remain intact, bring rebound later.
On the upside, expect recovery to be limited to 129.50 and bring another decline. Above 130.00 would bring recovery to 130.50 but resistance at 130.83 should hold and bring another retreat later. Above 130.83 would bring retest of 131.40 but only break there would revive bullishness and extend major upmove from 109.49 low to 131.90-00, then test of previous chart resistance at 132.33, however, overbought condition should limit upside to 133.00-10, risk from there is seen for a retreat to take place later.