(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; downtrend line in red; Fibonacci retracements in grey; chart patterns in white; 50-period simple moving average in light blue.)
Price action on EUR/JPY, a daily chart of which is shown, has just formed a small pennant pattern that may hint at a bullish continuation if broken to the upside in a substantial manner. After retesting a long-term support bottom earlier in the year, price has risen to breakout above several horizontal resistance levels, in addition to a downtrend resistance line extending from the mid-2008 highs.
If price succeeds in breaking above the current flag, as well as the next immediate support/resistance level to the upside (around 126.00), a major further resistance target resides around the 131.00 region. Any break above that level should confirm a potential bullish reversal in the pair.
To the downside, the 122.00 region should continue to act as near-term support.
By James Chen, Chief Technical Analyst, FX Solutions
