Euro - Japanese Yen has been making attempts to break over 107.95 for past 3 trading days but has been failing to do so. The drop took it to 106.12 before the currency pair closed for the week at 106.66.

The fact that EUR/JPY has not been able to break over 107.95 suggests that we can expect some downward consolidation. Please note that this zone had proved to be a very strong resistance area during April 2012 and a strong fall had taken place from here. But on the other hand the support came exactly at 22-day EMA and that keeps us neutral initially. The weekly MACD stays above the signal line very bullishly, while the daily MACD has moved below the signal line. This also indicates that some downward consolidation may take place while bullish sentiments continue to hold.

On the downside, any consolidation should find support first near 105.75/105.80. This support is derived from the Kijun line of daily Ichimoku cloud. Please check the technical outlook page. Any decisive break below this may take EUR/JPY to test the low of November 28th i.e. 105.28.

Here the psychological support of 105.00 would come into the picture and hence this level should prove to be a very strong support. With these supports holding, any break above 107.95 should bring further gains first towards the resistance near 108.65 (50% retracement of the downward move during April 10, 2011 and July 22, 2012) and then possibly towards 109.20 or above.

This target is derived purely from the psychological reasons as the resistance of 110.00 should start coming into the picture from this level. On the upside any sustained price action above 109.20 should target 110.00 psychological level.

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