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EUR/JPY is Forming a Kilroy Bottom

The EUR/JPY pair is forming an inverted head and shoulders pattern, also known as a kilroy bottom. The daily chart shows the bottoming attempt after price  pushed to a new low on the year in August at 135.73, breaking below the previous low on the year at 136.23, which was made in February.

We we begin this 9/2 session, price is pushing toward the neckline around 138.00. A break above 138.00 however does not necessarily mean a reversal in EUR/JPY, the falling trendline, and 100-day SMA is just under 139 and may also present resistance if the market is bearish. Then, a beak above this area, might open up 140. 140 might be the last line of defense for the bearish outlook. A break above 140 would also push EUR/JPY above the 200-day SMA. If the RSI also pushes above 70 in this scenario, we have a bullish signal, or at least a confirmed shift of trend from bearish since April, to neutral since August.

EUR/JPY Daily Chart 9/2

A break below 135.70 on the other hand continues EUR/JPY's downtrend with downside risk first to the 135.00 handle and previous resistance pivot, then to the 131.20 lows from October to November 2013.