VSheart of the week – EUR / JPY

Average reversion rebound potential for EUR / JPY (short term technical analysis)

Timestamp: August 22, 2021 at 2:00 p.m. SGT (click to enlarge the graph)

Source: CMC Markets

  • The two-and-a-half-month -619 pip drop seen on EUR / JPY from its June 1 high of 134.12 to its recent August 19 low reached a significant medium-term support area of ​​128, 20 / 127.90.
  • The medium-term support zone 128.20 / 127.90 is defined by a confluence of elements; the former low swing areas of March 24, 2021, the lower bound / support of the descending channel in place from the June 1, 2021 high and the 50% retracement of the previous medium-term bullish movement from the October 30, 2020 low to the June 1, 2021 high.
  • Together, the 4-hour Relative Strength Index (RSI) formed a bullish divergence signal in its oversold region on Friday August 20, followed by a bullish breakout of its corresponding significant descending resistance at the 43% level over the course of of the American session of August 20. These observations suggest that the recent bearish momentum has likely lost strength, which in turn supports a potential reversionary rebound in price action.
  • Look at the key medium term support at 127.90 for a potential push up to retest the intermediate resistance at 129.40 (old minor scale support from August 4/13) and a break above this sees a further potential bullish move towards the 130.30 target next (July 16 / August 2 resistance range and 38.2% of recent decline from June 1, 2021 high to August 19, 2021 low).
  • On the other hand, a 4 hour close below 127.90 invalidates the medium reversion rebound scenario for an extension of the medium term bearish movement to the next support at 126.35 (former high swing areas of the 13th. August / September 1, 2021).


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William Macleod

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