EURJPY reaches key support

By Tomasz Wisniewski |

Published: August 02 2022, 14:06 GMT+0

EURJPY reaches key support

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The second half of the European session brings us slightly higher volatility because of the fact that Nancy Pelosi is on here way towards Taiwan. China considers this a hostile move and has significantly increased its military presence in the region. This should normally trigger a risk-off mode but the reaction on the market is somehow divided.

For example, gold is climbing higher and is representing an old school risk-off mode and flee towards safe havens.

On the other hand, indices also look bullish with DAX pushing towards daily highs. For indices traders, we’re guessing the play will be as follows: If nothing will happen it’s better to hold long as the surge is highly probable. And if something is about to happen then…well, who really needs a stock exchange during World War III?!!

In this analysis, we’ll focus on EURJPY. This pair is in a very interesting place and by having yen in it, can participate in a relief rally if China and the US play it cool.

EURJPY is currently on an absolutely crucial support at 133.8 (green). This was a strong support in May and before that a resistance in February, October and May 2021. This area is also 50% Fibonacci on the most recent uptrend. Looks like a great place to stop or at least pause the correction.

Worth noticing is that the recent strength on the yen seems overwhelming. The price dropped for four days straight and also for a few weeks before that. After that steep decline, it’s normal to have at least a small correction and the place for that is currently perfect. Any bullish price action here, for example a long tail or double bottom, will be an invitation to buy, and that’s actually our base scenario here.

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