EUR/JPY Weekly Outlook - August 11 to 15, 2014
EUR/JPY dropped further to 135.73 before recovering strongly, on Friday, to 136.95 before closing for the week at 136.83.
The previous failure at 138.06 was as per the ongoing pattern where the currency pair found resistance, for the third time, near 55-day EMA.
EUR/JPY had been following a pattern of supports near 22-week EMA since September 2012 to May 2014 i.e. close to 2 month. The break of that support pattern was the first indication that the price-action may go for some substantial correction.. Now the pair even trying to break below 55-Week EMA. These facts and the break below 136.23 of February 2014 make the near-term bearish outlook stronger. However, the support seen in the upper half of 135.00 range suggests that the possibilities that the psychological support of 135.00 may hold should not be overlooked. Considering this, some upward consolidation may take place initially during the next week. On the upside we will expect a strong resistance in the range of 137.40 to 137.50. Even if a failure of this resistance takes place, following the pattern, the 55-day EMA should come as strong resistance. The current 55-day EMA is at 137.83.
If the above mentioned resistance holds and a break below the recent 135.45 takes place then a test of 135.00 will not be ruled out. Till now we are taking the recent fall as consolidation during an overall near-term bullish-trend. Any decisive break below 135.00 will start converting that outlook. Such a break should extend the fall towards 133.81 first and then possibly below.
On the upside, any failure of 138.05 resistance will start neutralizing the bearish outlook. Such a move will be the first indication of bottoming and that should then target the resistance zone of 139.00 to 139.28. Any move above 139.29 will strongly suggest that a bottom is in place and such a move should target 140.00 next.
From the longer-term perspective, The break over 139.23 had indicated a bottoming after the great fall of the global economic turmoil during 2008/2009. The subsequent breaks over 140.00 and then even 145.00 go in favor of that outlook. In fact the break over 145.00 key psychological level had come after over 5 years. The overall bullish outlook for the near-term will stay in place as long as there is no decisive break below 135.00.
Analyze Yourself - Various views of EUR/JPY Price-Action