Tough nut to crack on a test.
The EURJPY moved to the highest level since August 1 today at 131.10. At the highs, the pair tested the 200 day MA at 131.079 and the 50% retracement at 131.055.
When the 200 bar MA and 50% retracement is tested, it tends to be a really tough nut to crack. Find out why by watching this oldie but goodie video. It is a great level to anticipate (see this video from last week too):
Drilling to the hourly chart below, the pairs rejection against the resistance is pretty clear. Sellers leaned.
Well, traders focused on risk, will use the 200/50% as a risk defining level. Stay below bearish. Move above, and they will take a small loss and get out.
If not stopped out, the 130.257 was a swing area going back to August 28th and August 30 (see red numbered circles in the chart below). Yesterday, the price moved above that level and ran higher. A move below would give the sellers more confidence. Below that the 38.2% at 129.86 area will be eyed. That area (up to 129.969) should slow falls.
When you reach a key resistance target (like the 200/50%) and it holds, it could change the mindset for the buyers and sellers. That does not mean the market will not race through that level. However, it gives the rally sellers and profit takers a nice level to lighten up. It is still up to the sellers to overwhelm what has been a bullish run higher this week (the low was on Monday at 127.85). The good news for those sellers though is risk can be defined and limited, and if it holds (or stalls the rally), it could lead to a decent corrective move where lower targets are reached.
Time will tell, but the line of risk is drawn. ForexLive