EUR/JPY Cross Finds Key Level on Daily Chart

02/24/2010 12:01 am EST

Focus: FOREX

James Chen

Chief Technical Strategist, FX Solutions

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(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; 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 been entrenched in a relatively strong downtrend since the mid-January highs. In the process of this downtrend, several key support levels have been broken down, including key levels around the 127.00 and 125.00 price regions.

After breaking swiftly and strongly below the 125.00 area in early February, price action toyed with the 122.00 support/resistance region before consolidating in a bullish retracement that has taken the form of a short-term, flag-like parallel uptrend channel.

Currently on the verge of breaking down below this retracement pattern and potentially continuing the entrenched downtrend, this currency pair is eyeing a bearish breakdown below 122.00 once again. Any significant breakdown of this level should confirm a downtrend continuation, with an initial downside price target potentially around the 119.50 price region.

By James Chen, chief technical strategist,

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