Don’t look now but EUR/JPY seems ready to make another test of the area of interest around the 135.00 major psychological mark! If it holds as resistance again, price could fall back to the previous lows near the 133.50 minor psychological level or even until the 132.00 handle. On the other hand, a break higher could lead to a climb until the tops at the 137.00 levels. Stochastic is on the move up, which means that euro bulls are still in control of price action, while the 100 SMA appears to have crossed above the longer-term 200 SMA. In addition, the pair has been forming higher lows, hinting that buying pressure is building up. Better wait for candlestick confirmation to gauge how EUR/JPY might react to the inflection point.
Careful, pound bears! The range support on Cable’s 4-hour forex chart seems to be holding as a floor, with a bullish divergence already in play. See how price formed lower lows while stochastic drew higher lows? This suggests that a bounce back to the top of the range at the 1.5820 level or at least until the mid-range area of interest at 1.5450 is possible. However, the 100 SMA is below the 200 SMA and isn’t showing any intention of making an upward crossover anytime soon, suggesting that the path of least resistance is to the downside. In that case, a downside break could still take place, likely pushing GBP/USD down by around 600-650 pips, which is roughly the same height as the range formation. Don’t forget to review our lesson on How to Trade Breakouts if you’re thinking of shorting!
Last but not least is this long-term range on EUR/GBP’s daily forex time frame. The pair is currently testing the range resistance near the .7400 major psychological handle, still deciding whether to make a bounce or a break. If the resistance holds, price could move back to the bottom of the range at the .7050 minor psychological level or maybe until the near-term support at the .7250 mark. The 100 SMA is still below the 200 SMA while stochastic is indicating overbought conditions, confirming that a selloff is likely. However, a move past the previous highs or a long green candle closing above the resistance zone could indicate that euro bulls are gaining traction and that a longer-term uptrend is in the cards.
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To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis. Lucky for us, Pip Diddy fills us in on what we need to know about fundamentals with his Daily Forex Fundamentals.