FX.co ★ Strategy of the day on EUR/JPY

The spot rate approaches the lower limit of its medium-term bearish channel at 118.90 suggesting a rebound. However, a break of these levels will free a large potential and initiate a more violent bearish channel.

Technical indicators provide sell signals, but until the support is not broken, the assumption of a rebound is most likely. Bollinger bands are much discarded as a result of a strong decline these days. Stabilization is expected in a short term.

The spot rate is currently testing the lower limit of its channel, so we suggest 2 scenarios: the first one is the hypothesis of a rebound, then we recommend a buy on the level of 118.90 with the 1st objective at 119.50 and then at 119.70. A break through 118.70 will invalidate this scenario. The second scenario is a break of its support, then we recommend a sell stop, which means to sell the spot rate as soon as it has broken through its support of 118.90 with the 1st objective at 118.30 and then at 118.10. A break through 119.10 will invalidate this scenario.