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Fan Yang

EUR/JPY testing a falling resistance as it ranges between 112.30 and 114

Since the sell-off reaction to Brexit, EUR/JPY has been in a non-trending, consolidation mode.

EUR/JPY 4H Chart 8/16

(click to enlarge)

Bearish bias:
- Price has been consolidating and even cracked 118, but keeps the bearish bias because the high was under the 122 high established around the time Brexit votes were being counted.
- Also, note that price is below the 200-, and 100-period simple moving averages (SMAs) in the 4H chart. 
- Furthermore, since the RSI came close to 30 again in late July and early August, it has held under 60 for the most part. This reflects some bearish momentum. 

Key resistance/bearish scenario:
- As we can see, price is now trading at a falling resistance. 
- I think if the market is bearish, this trendline should hold. 
- In this scenario, there is downside risk first to this past week's lows around 112.30. 
- With the prevailing trend being bearish entering into July, the downside risk to 111 and 110 would not be considered aggressive. 
- In fact, the bearish bias suggests a possibility of price going down towards the June, post-Brexit low at 109.10.

114 resistance/bullish scenario:
- Now, if price breaks above the falling resistance, let's not jump to a bullish outlook just yet, establish with the prevailing trend entering into July being bearish. (EUR/JPY has been bearish even before Brexit).
- There is a key support/resistance pivot at 114.00.
- If price breaks above 114.00, EUR/JPY will be exposed to 118.00. 
- It should be noted that this bullish scenario in the short to medium term is still within the context of the longer medium-term downtrend. 

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