EUR/JPY Breaks Out, Eyes Higher Levels

EUR/JPY (daily chart) as of Tuesday (7/05/2011) has tentatively broken out above a descending resistance trendline extending back to the April 123.30 high. This trendline is part of a descending triangle consolidation pattern. The current pattern breakout occurs after price action formed a double-bottom around 113.50, which forms the bottom border of the noted triangle.  Not only has price made a tentative breakout above the triangle, it has also approached the peak of the double-bottom formation, just shy of the 118.00 price region. In the event of a breakout above this resistance level, price will have confirmed the triangle breakout, with a key further resistance target to the upside residing around the 120.00 price region. Strong support continues to reside around the 115.50 price region.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)
James Chen, CTA, CMT
Director of Technical Research and Education