EURJPY Channel Resistance (May 18, 2015)

However, the pair has already reached the top of the channel and may fall from the resistance near the 137.00 major psychological mark.

Stochastic is indicating overbought conditions, which means that euro bulls are tired and that sellers might take over. If so, the pair could head back to the channel support at the 134.50 minor psychological level.

For now, the short-term exponential moving average is treading above the longer-term EMA on the 1-hour chart, confirming that the uptrend is likely to stay intact. If you’re bullish on this pair, you could wait for an actual test of channel support to go long. For a more aggressive entry though, you could watch out for an upside break past the 137.00 channel resistance.

There are no major reports lined up from both the euro zone and Japan today, indicating potential consolidation at the inflection point. This also suggests that the current trend might carry on, unless there are any market updates that could influence overall risk sentiment.

Event risks for this setup in the coming days include the BOJ interest rate statement, during which BOJ Governor Kuroda could stress that there is no need to expand their stimulus program. As for the euro zone, the PMI reports from Germany and France later on this week could also determine where the shared currency might go.

The upcoming release of the FOMC minutes might also have a significant impact on overall price action, as this usually tends to spur risk-related moves. Hawkish remarks could encourage traders to buy the US dollar in exchange for the Japanese yen, leading to a broad-based yen selloff and a potential upside break from the EURJPY channel.

By Kate Curtis from Trader's Way