- EUR/JPY is pulling back within a month-long downtrend.
- Despite some bullish signs the short-term trend remains bearish.
EUR/JPY is pulling back after making a lower low on its persistent journey south.
Since the August 16 high the pair has steadily declined, tracing out a sequence of falling peaks and troughs which indicates EUR/JPY has established a short-term downtrend. According to technical analysis theory this favors more downside because “the trend is your friend”.
EUR/JPY 4-hour Chart
The last few periods, however, have formed a Japanese Hammer candlestick reversal pattern (shaded rectangle on chart). This Hammer was followed by a confirmatory green bullish candlestick. The current period is also strongly bullish – so far although it has not finished.
At the same time the Relative Strength Index (RSI) has moved from oversold back into neutral. This advises traders to close short positions and open long positions.
The correction lacks upside so far, however, which means there is not enough evidence from price action to indicate EUR/JPY has reversed its short-term downtrend.
It is showing bullish warning signs though, and if price can close above 157.49 it will suggest the short-term trend has reversed and the odds favor more upside.
Alternatively the pull back could soon run out of steam, allowing price to resume its downtrending bias. A break below 155.15 (September 16 low) would provide confirmation of a continuation of the bear trend to the next target at 154.44 – the August 5 low.
A break below that would be an even more bearish sign and suggest a probable reversal of the long-term uptrend.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
GBP/USD recovers toward 1.3200 after UK inflation data
GBP/USD gains traction and rises toward 1.3200 in the European morning on Wednesday. The data from the UK showed that the annual core CPI rose 3.6% in August, up from a 3.3% increase in July, and supported the GBP. Focus shifts to Fed policy decisions.
EUR/USD defends gains above 1.1100, Fed rate decision in focus
EUR/USD is defending minor gains above 1.1100 in the European morning on Wednesday. A broadly subdued US Dollar, amid increased bets of an outsized Fed rate cut and a cautiously optimistic market mood, underpins the pair. All eyes remain on the Fed policy verdict.
Gold buyers re-emerge ahead of the key Fed event risk
Gold price is finding some fresh demand near $2,570 early Wednesday, as buyers look to fight back control following the previous day’s correction from record highs of $2,590. Traders, however, could refrain from placing fresh directional bets on Gold price in the lead-up to all-important US Federal Reserve monetary policy announcements.
Binance addresses WazirX and Zettai accusations on the July hack
Binance responded to accusations from WazirX and Zettai by releasing a blog post on Tuesday clarifying how its ongoing dispute with WazirX impacts the recovery of over $230 million in user funds that was lost during the July cyberattack.
UK CPI set to grow at stable 2.2% in August ahead of BoE meeting
The United Kingdom Office for National Statistics will release August Consumer Price Index figures on Wednesday. Inflation, as measured by the CPI, is one of the main factors on which the Bank of England bases its monetary policy decision, meaning the data is considered a major mover of the Pound Sterling.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.