Weekly
• Last Candlesticks pattern: Window
• Time of formation: 24 April 2017
• Trend bias: Up
Daily
• Last Candlesticks pattern: Hammer
• Time of formation: 18 May 2017
• Trend bias: Up
EUR/JPY – 128.20
Although the single currency rebounded initially this week, as renewed selling interest emerged at 130.40 and price has retreated again, retaining our view that further consolidation below this month’s high at 131.40 would be seen with mild downside bias 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 lower Kumo (now at 126.38), bring rebound later.
On the upside, whilst recovery to the Tenkan-Sen (now at 129.46) cannot be ruled out, reckon said resistance at 130.40 would cap upside and bring another decline later. A daily close above this resistance would defer and suggest the retreat from 131.40 top has ended instead, risk a stronger rebound but break of resistance at 130.83 is needed to shift risk back to upside for a retest of this level, having said that, only break there would revive bullishness and extend recent upmove to 132.00, then towards previous resistance at 132.33.
Recommendation: Hold short entered at 129.50 for 127.00 with stop above 130.50
On the weekly chart, euro’s retreat after early rise to 131.40 formed a black candlestick last week as suggested, retaining our view that consolidation below this level would be seen and downside bias remains for correction to 128.00, then test of the Tenkan-Sen (now at 127.53), 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 resistance at 130.40 (this week’s high) would bring recovery to resistance at 130.83 which is likely to hold, 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.
