The EUR/JPY breaks above the 140.00 level

The Euro continues its rally for today after the European markets closed higher and the Pound strengthen after the polls suggest that the Scottish referendum will keep the UK united. The EUR/JPY has broken a key resistance level around the 140.00 and it looks like it will keep its bullish momentum. However, we must be attentive to a possible pullback to the 140.00, because the pair is clearly overbought. If the pair does pull back to this zone, the area could become support and stop the price there for a continuation of the bullish trend.

The GBP/JPY confirms breakout of the 175.00 level

The Pound is rallying versus the Yen in anticipation of the independence referendum vote in Scotland. So far, the polls are pointing to a lead of the No independence vote, that is why the Pound has been rallying, but we cannot be so sure on how the final vote will come out. Now that the GBP/JPY has confirmed the breakout of the 175.00 resistance level to the upside, if we see a pullback to this same level, then there could be an opportunity for a long entry. Since support becomes resistance and resistance becomes support, this area of the 175.00 could become support on a pullback. 

The Dollar falls before the FED’s announcement

The Dollar has been retracing for today after a report from the Wall Street Journal suggested that the FED may use the words “considerable time” when referring to a possible interest rate hike. Investors and traders have been waiting for the FED to announce that interest rates may rise sooner than expected, but with today’s speculation traders prefer to close their Dollar positions just in case the unexpected happens.

If the FED hints at a possible rate hike by next year, the Dollar may go back to its bullish trend and more losses could be seen on the EUR/USD, which has been supported, not by Euro Zone fundamentals, but by weakness on the greenback. We do not know for sure what kind of language is Yellen going to use, that is why the best thing to do is to stay on the sidelines until the statement is released.

Markets await the FED’s press conference

Asian stock markets have open to the upside as investors and traders wait for the results of the two day meeting of the FED, which starts this Tuesday. The market is going to be very attentive to the press release by the FED, searching for clues as to when will the FED raise its interest rates. The FED has said that interest rates will not probably go up until 2015, but due to the fact that the economic data from the United States has been coming out better than expected; there is a probability that rates could go up before that time.

In the meantime, the Nikkei has risen 0.4% up to now, following the higher openings for the most part of Asia. The Yen falls due to the inverse correlation with the Nikkei. That is why when the Nikkei rises, the Yen falls.

The road is clear to the upside for the USD/JPY

The USD/JPY has practically the road clear to keep rising up to the 110.66 level, which is the high of August, 2008. After the price broke the 200 Month Exponential Moving Average to the upside, around the 105.80 level; the price continues with a strong bullish momentum. Confirmation of the breakout of that 200 EMA may come in the following months.

Since this is precisely a Monthly chart, in order to see confirmation of the break out, we may have to wait 2 or 3 more months. Let’s see how the price keeps behaving around this zone and if indeed there is a continuation to the next high. Technically there is nothing in the way that may stop the price before the 110.66, except some minor retracements on the way up.

EUR/USD – Inverted Head and Shoulders – 4 Hour Chart

The EUR/USD has formed what appears to be and Inverted Head and Shoulders chart pattern. It is called “inverted”, because it is the upside version of the original Head and Shoulders pattern. The upper trend line is the neckline or confirmation line. A breakout of that line with a couple of bullish candles closing above it confirms the breakout. But after confirmation of the breakout, one should wait for the pullback to the neckline for a possible buy or long entry. If the price does break above the neckline and continues going higher, it has the road open all the way to the 1.3100 level.

The Kiwi keeps losing ground versus the Dollar

The NZD/USD has dropped to seven month lows after the Reserve Bank of New Zealand said that the current levels of the Kiwi are unjustified and unsustainable. That is why we have seen the pair gain more bearish momentum, especially after it broke below the 0.8300 level. The pair is now free to keep falling to the 200 Week Exponential Moving Average around the 0.8063. The price has already bounced from that zone; therefore another visit to the same area could give us another bounce to the upside.