eurjpy potential setback below 120 90 within range configuration 1850122017

Since our last analysis dated on 19 April 2017, the EUR/JPY had shaped the corrective rebound as expected and hit the upside target/resistance at 117.50/90. Click here for a recap on our previous report.

The EUR/JPY cross has surpassed the 117.50/90 short-term resistance to print a high of 120.88 on 24 April 2017.  The “euphoric rally” seen in the EUR/JPY is triggered by the outcome of the 1^st round of the French presidential election where Macron (centrist, pro-business) and Le Pen (far-right, anti-Euro) will face off in the final round on 07 May. Latest opinion poll from Ipsos had indicated the Macro will trump over Le Pen by a wide margin (62% versus 38%) in the final round of the presidential election where such result brought a sense of relief that the probability of a Frexit is reduced greatly.

Now, let’s take a look at its latest technical elements

Short-term technical outlook on EUR/JPY

(Click to enlarge charts)

Key technical elements

• From a bigger picture time frame, the recent rebound seen on the EUR/JPY cross pair on 17 April 2017 and yesterday’s steep rally has altered its price pattern into a “Symmetrical Triangle” range configuration in place since the 06 July 2016 low of 110.83 (see daily chart).
• The decline from 15 December 2016 high to 17 April 2017 low of 114.85 has stalled close to the 61.8% Fibonacci retracement of the up move from 24 June 2016 low to 15 December 2016 high. Interestingly, the upper boundary of the “Symmetrical Triangle” is now acting as a resistance at 121.90 which coincides closely with the 76.4% Fibonacci retracement of the decline from 15 December 2016 high to 17 April 2017 low. Based on the Elliot Wave principal and fractal analysis, these observations derived from the aforementioned Fibonacci retracement ratios are likely to support that the current price action of the EUR/JPY is evolving in “ Symmetrical Triangle” range configuration and its on-going consolidation/sideways movement may have not been completed (see daily chart).
• Yesterday’s daily close of the EUR/JPY has shaped a bearish “Shooting Star” candlestick pattern which suggests a potential decline in price action at this juncture after a steep gapped up rally.
• The shorter-term (1 hour) Stochastic oscillator has reached an extreme overbought level which suggests that current upside momentum of price action is being overstretched at this juncture. Do note that the longer-term daily RSI oscillator is still bullish and still has some room left to manoeuvre to the upside before it reaches an extreme overbought level. These observations suggest that in the short-term price action may see a pull-back /setback first before another upleg materialises.
• Based on the Elliot Wave Principal and fractal analysis, the EUR/JPY may have completed a minor degree five wave up move from 17 April 2017 low to yesterday, 24 April 2017 high of 120.88, label as a. Current price action is likely in the midst of undergoing a potential corrective decline, wave b to retrace some of the recent gains of the rally that started from 17 April 2017 low.
• The significant short-term support rests at 118.08/117.80 (former minor swing high areas of 07 April/10 April/20 April 2017/ & 50% Fibonacci retracement of the rally from 17 April 2017 low to 24 April 2017 high) and 117.12/117.00 (61.8% Fibonacci retracement of the rally from 17 April 2017 low to 24 April 2017 high, gap and the minor ascending trendline from 17 April 2017 low).

Key levels (1 to 3 days)

Intermediate resistance: 120.10

Pivot (key resistance): 120.90

Supports: 118.08/117.80 & 117.12/117.00

Next resistances: 121.90 & 122.90

Conclusion

As long as the 120.90 short-term pivotal resistance is not surpassed, the EUR/JPY  is likely to shape a potential setback to target the 118.08/117.80 support with a maximum limit set at 117.12/117.00 before another upleg materialises.

However a clearance above 120.90 may see a further squeeze up towards the “Symmetrical Triangle” range top at 121.90.

Charts are from eSignal

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