EUR/JPY Pay Attention to the 135 Level - 4 May 2015

The EUR/JPY pair broke higher during the session on Friday, and even broke above the 135 handle. This of course was a very bullish sign, but we sold off at the end of the session in order to form a nice-looking shooting star. The shooting star forms right at the 135 level course, so that is an area that should be paid attention to. After all, it is a large, round, psychologically significant number. On top of that, it is an area that had previously been resistance, so it should continue to be.

Even beyond that is the fact that the 200 day exponential moving average offered dynamic resistance and as a result I believe that the longer-term traders have stepped in as it is one of their favorite longer-term averages to follow. Because of this, I think that plenty of traders will get involved and even though the weekly candle of course was very bullish, I think that a pullback is imminent.

Simply overbought.

I believe that the Euro is simply overbought at this point. I think that’s true in most euro related pairs, so at this point in time I don’t really want to buy that currency. Ultimately, I think that the market will more than likely fall back towards the 132 level, an area that had been previously rather resistive. Because of that, I think the buyers will come back in and support the market somewhere in that general vicinity. It is because of this that I am not anticipating a meltdown, just simply a return to those lower levels.

I think the longer-term downtrend is still very much in effect, but I think we are starting to fight it now. A lot of times when the markets will try to turn things back around and change the trend, it becomes a very volatile type of situation. I think that’s what we are seeing now, so a pullback is really all I’m looking for. If we break above the top of the shooting star in the 200 day moving average, that would be an extraordinarily bullish sign and I think we would continue towards the 138 handle.

EURJPY 5415

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.