What are the charts saying?
The EURJPY was converging on itself 24 hour ago (see post). It was time to keep an eye on it and look for a break with momentum.
Well the pennant formation (see chart above) was broken on the downside toward the end of the NY session yesterday, but momentum could not take out the prior days lows. Failed BREAK. No momentum.
The subsequent rally higher stalled right at the topside trend line (see green circle 3). IT also was the 200 day MA level as well.
Holding that level did not quickly start the selling barrage, but it did set the high for the day and turn the bias around. It was not until the early European session started that the momentum kicked in.
Unfortunately for the US session, the work was done for the day during the 4-5 hours in the European session. The price fell to the 38.2% retracement of the move up from the Dec 3 low, and stalled. The last 8 hours have been spent in a 31 pip trading range. Not much going on. Market in non-trending phase. But shorts from above, will be now looking for more selling.
Looking at the daily chart below, the pair at the highs this week flirted with the 200 day MA (including today at the high). The holding of that MA at 134.10 and moving away is bearish.
The other area of importance to me is the 133.059-133.256. Looking back, there have been a number of swing lows in this area (see green circles in the chart below). There was a quick failed break in September. That lasted a day or two. Starting at the end of October and into December, the price stayed below. Today was the first peek back below after 5 days back above. Can the market stay below and spend more time below this key line in the sand? That is what I (and other traders) will be focused on going forward. Stay below is more bearish. Move above and there may be some disappointment.
