EUR/JPY Breakdown: 500-Pip Drop to 166 Likely
Muhammad Faraz 
EURJPY Breakdown 500-Pip Drop to 166 Likely
The EUR/JPY daily chart reveals the currency pair breaking below key support levels, currently trading at 171.292 (-0.70%) as it heads toward our 166.00 target. This analysis examines the technical factors suggesting further downside potential for the cross pair, with particular attention to the emerging bearish momentum and key support levels ahead.
Current Market Position and Bearish Signals
EUR/JPY displays several concerning technical characteristics:
- Breakdown Confirmation: Closed below 172.50 support
- Strong Bearish Momentum: 0.70% daily decline
- Lower Highs/Lows: Established downtrend pattern
- Volume: Increasing on downward moves (473.5-926.94 range)
- Resistance Zone: 172.50-175.00 now acts as strong overhead supply
The pair has broken its 3-month upward channel, suggesting a potential trend reversal.
Critical Resistance and Downside Targets
Resistance Structure (New Ceiling):
- Immediate Resistance: 171.50 (today’s opening price)
- Key Supply Zone: 172.50-172.517 (recent breakdown point)
- Major Resistance: 175.00 (psychological barrier)
Downside Pathway to Target:
- First Support: 170.963 (today’s low)
- Psychological Level: 167.50 (interim support)
- Primary Target: 166.461 (major historical level)
- Extension Potential: 165.00 (2023 lows)
The 166.461 level holds particular significance as it’s marked as the “Major Resistance Zone” on the chart – suggesting it should now act as strong support.
Technical Indicators Supporting Bearish View
- Trend Breakdown: Price below 50-day and 200-day MAs
- Momentum Shift: RSI breaking below 40 level
- Volume Confirmation: Higher volume on declines
- Candlestick Patterns: Series of bearish engulfing candles
- Macro Alignment: BOJ potentially tightening while ECB pauses
Bearish Trading Strategy
Entry Approaches:
- Current Levels: 171.29 with stop above 172.52
- Pullback Entry: On retest of 172.50 resistance
Stop Placement:
- Daily close above 172.517 invalidates bearish thesis
Profit Targets:
- First Target: 167.50 (50% position)
- Final Target: 166.461 (full position)
- Trailing Stop: Move to breakeven at 169.00
Key Risk Factors to Monitor
- BOJ Policy: Unexpected dovish stance could weaken JPY
- ECB Surprises: Hawkish comments could boost EUR
- Risk Sentiment: Stock market rallies may hurt safe-haven JPY
- Technical Rebound: Oversold conditions may cause short-term bounce
Conclusion: High-Probability Bearish Continuation
EUR/JPY presents a compelling short opportunity with clearly defined risk parameters. The path to 166 appears probable given the breakdown below critical support and emerging bearish momentum. Traders should watch for potential retests of 172.50 as secondary entry opportunities while managing risk appropriately.
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