By: DailyForex.com
EUR/JPY rose during the session on Monday as the bullishness continues in this market. The Euro has enjoyed a nice reprieve from the massive selloff that we saw over the early part of the summer, and now we find ourselves butting up against more fundamental issues.
The European Union has done very little to actually make significant progress in the debt crisis. However, the markets have been very forgiving, and we have to wonder how long the patience will continue. After all, this debt crisis has been going on for well over two years now.
Interestingly enough, when we broke through the 100 handle I thought for sure this pair was going to take off. Ultimately, it did hit the 103 handle, but fell back down to the 100 level in order to retest the level as support. This is classic technical analysis and had me thinking that we were going to go much higher. However, we have recently started to form a descending triangle. While it cannot be verified just yet, if we do manage to break below the 100 handle, this would be a very significantly bearish signal.
Triangle
The triangle that I have marked on this chart is everything as far as my analysis is concerned. With earnings season currently running in the stock markets on Wall Street, and this pair being a highly risk sensitive one, there is a chance we could see significant moves. The pair generally goes up when traders are happy, and down when traders are fearful.
If we break below the 100 level, I would expect a bit of noise all the way down to 98. But once we get below 98, this is when things get really ugly really quick. If this happens, I would fully expect 95 to be visited and prices much lower.
Alternately, we could break above the top of the triangle, and this would of course be very bullish sign. I think if we can get above the 102 handle, which of course is over the down trend line, we could see a significant move higher. This would most certainly be piled upon by other traders if we can get above the 103 handle.