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EUR/JPY Faces Downward Pressure: Technical Support Looms Near 156.00

The EUR/JPY currency pair is experiencing a marked decline, accelerating its downside momentum and reaching multi-day lows near the 157.00 level on Wednesday. This follows Tuesday’s losses, raising questions about the pair’s near-term direction and potential support levels.

Trend Analysis:

The Euro’s fall against the Japanese Yen has led market analysts to identify key areas where transitory support might emerge. A deeper decline could see the cross extending its move to the provisional 55-day Simple Moving Average (SMA) around 156.00. This level is likely to endure an initial test, according to technical chartists.

Should the currency pair continue its bearish trajectory, the next significant support level to watch is the 100-day SMA, located near 152.50. This precedes the July low of 151.40, reached on July 28, which serves as another notable barrier to further downside.

Long-Term Outlook:

Despite the short-term bearish tilt, the longer-term positive outlook for the EUR/JPY cross remains intact. Analysts point to the 200-day SMA, currently at 147.51, as a major support level that underpins the bullish sentiment. As long as the pair stays above this moving average, the long-term uptrend could continue.

Implications and Considerations:

The decline in EUR/JPY, coupled with support and resistance levels, presents trading opportunities for both short-term and long-term investors. The 156.00 area, marked by the 55-day SMA, may offer a potential entry point for contrarian traders looking for a bounce. Conversely, continued weakness below this level could attract sellers targeting the 152.50 and 151.40 levels.

Technical Chart:

A daily chart for EUR/JPY further illustrates the aforementioned technical patterns and support zones.

TRADE IDEA DETAILS

CURRENCY PAIR: EUR/JPY

CURRENT TREND: Short-term bearish, long-term bullish

TRADE SIGNAL: Sell (Short-term) / Buy (Long-term)

Short-term (Sell) Trade:

👉ENTRY PRICE: 157.00 (Recent multi-day low)

✅TAKE PROFIT: 156.00 (55-day SMA) for a short-term trade, or 152.50 (100-day SMA) for a more extended trade

❌STOP LOSS: 158.00 (Just above the recent trading range)

Long-term (Buy) Trade:

👉ENTRY PRICE: 156.00 (55-day SMA)

✅TAKE PROFIT: 160.00 (Psychological resistance level)

❌STOP LOSS: 154.00 (Below the 100-day SMA)

RISK MANAGEMENT:

  • Position sizing should be in line with individual risk tolerance.
  • A 1-2% risk of total capital for each trade is advisable.
  • Trailing stop orders may be used to lock in profits.

ANALYSIS:

  • Short-term (Sell) Trade: The recent decline in EUR/JPY and a break below the 157.00 level offers a short-term selling opportunity. The 55-day SMA serves as a near-term target.
  • Long-term (Buy) Trade: The longer-term bullish trend and support at the 156.00 level (55-day SMA) provide an opportunity to buy, expecting a bounce and a return to the longer-term upward trend.

TRADE PLAN:

  • Short-term Traders: Monitor the pair closely for a break below 157.00 and consider taking profits at 156.00 or 152.50.
  • Long-term Traders: Look for buying opportunities around 156.00 and monitor the pair for signs of a rebound.

FINAL THOUGHTS:

  • This trade idea encapsulates both short-term and long-term perspectives, reflecting the complexity of the EUR/JPY currency pair’s current dynamics.
  • Caution should be exercised, and continuous monitoring of economic indicators, central bank policies, and other factors that may impact the EUR and JPY is recommended.
  • Adhering to a disciplined risk management approach will help in navigating the inherent uncertainties in forex trading.

These trade ideas should be considered in conjunction with individual investment goals, risk tolerance, and market analysis, and may need adjustments based on real-time market conditions. Always consult with a financial advisor or use appropriate tools like Bloomberg Terminal, MetaTrader 4, or TradingView for real-time analysis and decision-making support.

Conclusion:

The EUR/JPY currency pair’s recent downside move highlights the importance of monitoring key technical levels, which may serve as turning points or continuation markers. While the short-term outlook appears bearish, the longer-term trend remains favorable for the cross. Traders and investors should align their strategies with these dynamics, considering both immediate price action and broader market themes.