- EUR/JPY continues trying but failing to breakout above the top of a range.
- MACD is diverging bearishly with price and there is a strong possibility of decline unfolding.
EUR/JPY is meeting a brick wall of resistance at the top of its ten-week range and despite repeated attempts has not been able to breakout higher.
EUR/JPY 4-hour Chart
The pair is in an overall range-bound market – its trend is sideways. Since it is a principle of technical analysis that trends tend to extend, the odds favor a continuation of the range.
This suggests that the next move for EUR/JPY will be back down towards the range floor in the 154s.
A move below 161.91 (October 8 low) would help confirm such a move was underway. A break below the trendline for the up leg at around 161.70 (black line on chart) would provide stronger confirmation. The next downside target for EUR/JPY would be at about 158.32 – the October 1 as well as September 30 lows.
The Moving Average Convergence Divergence (MACD) momentum indicator is diverging bearishly with price (red dotted lines on chart). Whilst price has been making slightly higher highs with each breakout attempt, MACD has been declining. This is a further warning sign of losses to come.
Alternatively, it is possible that a decisive break above the range highs would indicate a breakout higher and the evolution of a new short-term uptrend. A decisive move would be one characterized by a longer-than-average green candlestick which cleared the range high and closed near its high, or three green candles in a row breaking above the top of the range.
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