EUR/JPY has recently tested the upper boundary of a multi-week range near 163.50. This area is critical as the pair faces pressure from technical divergence and economic uncertainty. Traders are keenly watching whether EUR/JPY will break higher or reverse lower, marking a significant move in either direction.
Key Takeaways
- Trend Consolidation: EUR/JPY is confined within a multi-week range, testing resistance around 163.50.
- Bearish Divergence: The MACD shows bearish divergence, suggesting a potential reversal.
- Critical Levels: Key downside targets include 161.70 and 158.32 if a bearish breakout occurs.
Technical Analysis
Daily Chart
On the daily chart, EUR/JPY remains near the top of its established range. The pair recently tested the 163.50 resistance, a level it has struggled to break in the past few weeks. The Moving Average Convergence Divergence (MACD) shows a bearish divergence, which could indicate a possible downturn. While no clear reversal has occurred, price action suggests a cautious approach, especially with the lack of bullish momentum beyond 163.50.
4-Hour Chart
The 4-hour chart highlights the indecision around the current resistance zone. The EUR/JPY pair is forming a possible double-top pattern near 163.50, often considered a bearish signal. The price must drop below 161.91 for additional bearish confirmation, which would align with the trendline support at 161.70. If the pair breaks these levels, it could target 158.32, which was a support level seen on October 1 and September 30.
1-Hour Chart
On the shorter time frame, the EUR/JPY shows a strong push towards 163.50, but with weakening buying interest. The recent higher highs in price are not being confirmed by momentum indicators, increasing the risk of a correction. Should the price fall below the hourly equilibrium around 161.91, it would likely accelerate towards lower support zones.
Economic Data Impact
The price of EUR/JPY has been heavily influenced by divergent monetary policies between the European Central Bank (ECB) and the Bank of Japan (BoJ). While the ECB’s relatively hawkish stance supports the euro, the BoJ’s ultra-loose policy has kept the yen on the defensive. Additionally, global market volatility and USD weakness, driven by potential Fed rate cuts, add to the uncertainty surrounding EUR/JPY’s direction.
Trading Recommendations
- For Day Traders: Monitor price action around the 163.50 resistance. A failure to hold above this level may provide short opportunities, targeting 161.91 and lower.
- For Swing Traders: If the pair decisively breaks below 161.91, look for continued downside toward the 158.32 level. A breach of this could open further downside risks.
Conclusion
EUR/JPY is at a pivotal point as it tests significant resistance near 163.50. Bearish divergence in technical indicators like the MACD suggests that the next move could be lower, but confirmation from price action is still needed. Traders should remain vigilant, watching for a break below 161.91 to confirm bearish momentum or a push higher to challenge new resistance levels.