The last few days, there has been a perfect combination between two currencies, one being strong against all of its counterparties, the other weak in the broader market. The pair tracking the relationship between the 2 of them -of course- rallied. We are talking about EURJPY.
Long term, the pair is still clearly in a downtrend, actually 116.25 area represents the Aug19 / Mar20 lows. On the previous daily chart, we can adjust the price action to a descending channel originated during the last autumn (violet) and also see that a steeper inclined trend -represented by the red dotted line- looks like it has recently been broken. The price is trading just above the 66 EMA, in touch with the upper BB band. Both RSI and MACD are giving good signals, this latter one just turned positive and relative strength is printing a 62 mark, above 50 but still not overbought. Daily, it does look like the up move has legs to continue mid-term.
On the 1H chart, we also see a constructive pattern: yes, the price is taking a breath after a steep rally and is ‘blocked’ within a wedge during last hours, giving the opportunity to RSI to come down from overbought levels; till Macd is positive, it’s still a good sign even if it’s currently declining.
So, just to come to an end, we think EURJPY rally has still room to go, being the first natural target somewhere very close to the 119 Area. In the short term, it could go and test support areas around 117.50 (where the hourly trend should pass) and EVENTUALLY 116.95 before grinding higher. If you are already long, keep it going and adjust your trailing; if you are thinking about jumping in, use shorter timeframes to fine-tune your entry and stop loss. Don’t forget however that the longer term trend (since 2018) is still bearish.
By: Marco Turatti