EUR/JPY bulls have been on a tear higher this week, but they may run into major resistance ahead. Breakout ahead or is it time for the rally to end?
Resistance Ahead on EUR/JPY?
As mentioned above, EUR/JPY bulls have been on fire this week as the pair moved over 200 pips since the week open–one full weekly ATR!
It’s likely the positive business sentiment data from Europe had a hand in this move higher (Eurozone manufacturing growth remains strong in November), and the continued stream of positive covid vaccine news may be the driver for the yen’s move lower against the majors as it drive risk sentiment further towards positive.
After a big move like that, expectations are that a pullback may be around the corner, and that may be true once again as EUR/JPY approaches the Summer higher around 127.00.
If retested, we’re watching the reaction before taking action, leaning towards a buy if the pair breaks above 127.00 convincingly, and if tomorrow’s European services PMI data surprises us with better-than-expected news. It’ll also be helpful for the short-term bull case if we see better-than-expected European retail sales data and covid-19 headlines remain positive.
If retested and we see disappointing data from Europe, and a market focus shift towards increasing lockdowns across Europe and the U.S., then we’ll keep an eye out for bearish reversal patterns around 127.00 for a potential move back to the broken resistance area around the 125.00 major psychological handle.
What do you guys think? Are the bulls waiting for EUR/JPY break higher, or will the bears take charge once again for a swing move lower in December?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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