The euro has been trading within quite a tight range against the yen over the last couple of weeks between 112.50 and 114 and only today failed at the upper end of the range, but is it done there?
The pair entered the Ichimoku cloud on the 4-hour chart for the second time in that period, but unlike last time, on this occasion the top of the cloud was tested and price rebounded lower.
Now in the cloud, the pair faces a test of support at the bottom of the cloud, around 113. Should it break below, then we could possibly see the bottom of the trading range being tested once again.
If, however, the bottom of the cloud provides sufficient support for the pair, it may signal a bullish break out of the range in the coming days.
A bounce off the bottom of the cloud may trigger another push higher and test of the top of the cloud, a break of which would indicate that the pair has entered into bullish territory on the 4-hour chart for the first time since the end of July.
This could be the spark that the pair needs to really test the 114 resistance level that has held firm previously.
The fact that we are seeing a bottoming pattern forming on the daily chart (possibly a double bottom) after the pair thus far failed to make a new lower low may suggest the outlook for the broader trend is looking more bullish after trending lower since the end of 2014. Of course, much more confirmation is needed on the daily and weekly charts before this becomes apparent.