EUR/JPY Price Prediction: Unspooling a consolidation phase within a bull trend, gap risk

EUR/JPY is unfurling a consolidation phase within an uptrend. Eventually it is expected to break higher.
An open gap just below price presents a short-term bearish risk, however, and a deeper pullback might evolve first.

EUR/JPY is still unwinding a consolidation phase within a short and medium-term uptrend. Given the technical analysis maxim that “the trend is your friend”, however, the odds still favor an eventual continuation higher once this phase ends.

EUR/JPY 4-hour Chart

A break above 166.69 (October 31 high) would probably confirm such a continuation higher. Resistance at 167.96 (July 30 swing high) could provide an initial target and act as a barrier to further upside.

The minimum target for the breakout from the range, however, lies higher, at 169.68, the 61.8% Fibonacci extrapolation of the height of the range to the upside.

That said, there is a risk of a deeper pullback first due to the open gap, which lies just below the price between 164.90 and 164.45 (red-shaded rectangle on the chart). Gaps have a tendency to be filled, according to technical analysis theory. If so, EUR/JPY may weaken initially and fall to the bottom of the open gap at 164.45, before perhaps recovering and resuming its dominant uptrend.

The Moving Average Convergence Divergence (MACD) momentum indicator has been falling during the unwinding of the consolidation phase and this decline in momentum without a corresponding fall in price is a sign of underlying weakness. It is another mild indication of the risk of possible near-term weakness materializing.

Share: Feed news

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.