- EUR/JPY bears waiting patiently for a break of daily support.
- Bulls holding back, for now, from chasing the monthly bullish impulse, although note prospects of higher highs.
EUR/JPY is currently trapped on the daily chart between support and resistance and a break out is due.
However, while the monthly chart offers prospects of a continuation for a higher high, there may need to be a correction to the downside on the lower time frames.
The following is a top-down analysis that illustrates where the next trading opportunity could arise and offers something for both the bulls and the bears.
Monthly chart
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The price completed a W-formation bottoming pattern with a retest of the nose of the structure, precisely at a 38.2% Fibonacci of the bullish impulse.
This gives rise to the prospects of a higher-high.
Tthe first port of call is the confluence of the prior structure looking left and a -272% Fibonacci retracement level of the impulse’s correction to the 38.2% Fibo.
Weekly chart
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As illustrated here on the weekly chart, there still needs to be a correction of the weekly bullish impulse and it is expected to land where the Fibo retracements meet structure.
In the above scenario, a 38.2% Fibo retracement is expected prior to the monthly extension target.
Daily charts
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On the daily chart, however, the price is stuck in the mud between support and resistance.
However, a break of support will ignite the prospects for the above scenarios:
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Adding more conviction to the setup, there is a confluence of the Fibos across the weekly and daily time scales that meets prior resistance.
It will be worth noting the price action on the DXY and euro as well in order to gauge whether the euro is about to give back some gains and trigger the downside in the cross:
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US dollar positioning is conflicting with prospects of a bullish correction in DXY
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EUR/USD Price Analysis: Conflicting weekly and daily outlook, bulls in driving seat
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