With the Euro quickly approaching resistance at 103 against the Japanese yen, some are wondering if the current momentum still has staying power.

The answer lies in the currency pair’s momentum as it approaches the round figure barrier.  The 103 resistance level has been tested 4 times in last week and half.  The last time, the price action broke through the resistance level briefly – only to fall back through moments later.  Given technical indications, the scenario is likely to happen again.  Referring to technical analysis 101, the more times a technical barrier is tested, the more resilient that level becomes.  This is especially true when oscillators like stochastic have moved into overbought territory – signaling a short opportunity.

The overbought signal can also be coupled with a growing bearish divergence in the EURJPY exchange compared to a MACD histogram – the difference between the oscillator signal lines.  The divergence, although relatively small, is still noteworthy as it indicates a lessening of momentum as the price action approaches the key technical level.  As a result, we anticipate that the Euro could be privy to some short term selling in the near future, with the 103 offering up much more resistance.

Although a temporary move up can be expected, we anticipate that the ultimate resistance figure lies above at 103.16.  A failure to break through this level would be impetus for a decline in the cross pair, to initial support at 102.57.  Lower down, if the technical neckline is broken, the currency pair could hit as low as 100.83 – near the beginning of the triple top pattern.

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