We are at a level where there should be support

Adam posted a trade recommendation from BAML. They like buying the EURJPY.

I have been posting about the EURJPY over the last few days (you can find the posts by going here). As a summary, the EURJPY stalled at the 200 week moving average at the highs on Tuesday. That 200 week moving average comes in around 130.70.

The fall yesterday covered about 170 pips. In the process, the price fell back below the 50% of the move down from the 2014 high (see weekly chart above) at the 129.637 level. That is not too bullish and helped contribute to the fall. Remember that 129.637 level.

The price fall yesterday stalled against support defined by swing levels going back to July 4th and July 5th. That area comes in at 128.957-129.08 (see the yellow area on the hourly chart below).

That support level also held in Asian trading today, but the corrective rally today, could only rally to a high of 129.65. Remember the 50% on the weekly chart was 129.637. HMMMMM. The inability to get back above - and stay above - that 50% level helped to define more of a bearish bias today. The price moved lower and bottomed at 128.48 in the London session.

What now?

From the bottom, the price rebounded back above the key yellow area off today's lows, but has stalled at a topside trend line on the hourly chart that connects the highs today (see blue circles). Bears trying to keep control.

Nevertheless, if BAML is right, this area may be the spring board for a run back to the upside. When a floor is broken and fails, traders do like to reestablish the level as support again. So I expect traders will try to buy the yellow area again with stops below (128.95-129.08).

If the buyers are right (i.e., not stopped out on a move below 128.95), the buyers have more confidence and others will jump in at higher prices. However be aware the trend line on the hourly chart (see blue circles) and the 50% from the weekly at 129.637 need to re-broken to the upside if the bulls are to take back full control. IF they can, I can see more buyers entering for the push to 130.00 and then the 200 week moving average at the 130.66 area.

What if the yellow support level does not hold?

If, the 128.95 level does not hold and you still like the long side, a move to 128.00 (lows from July) or 127.56 (38.2% retracement), would be targets (see daily chart below). Either that or wait for a move back above the yellow area again to confirm another failed break.

SUMMARY:

The EURJPY is testing support. Hold and get above the trend line and 129.65 should solicit more buying with 130.00 and the 200 week MA at 130.70 level the next key targets.

If the 128.957 does not hold a move to 128.00 or 127.56 would be the next downside targets.