EUR/JPY 4H chart 2/20/2013 8:05AM EST
Consolidation channel: The EUR/JPY has been consolidating in a slightly-tilted-downwards channel since finding resistance at 127.72 in early February. It recently found support around the 123.00 handle, which was a confluence of other support factors. A swing to almost 126 now tests the consolidation channel resistance.
Convergence: What we really have here is a convergence of a rising trendline going back to January, and a falling channel resistance. As price nears the apex, a true break will have to come from the range of consolidation and not just from a break of these trenline factors.
Breakout: To the upside, a break above 127.75 should clear the consolidation high, signaling bullish continuation. A break below 122.90 will be needed not only to clear the rising trendline, but show topping to suggest more bearish correction. There is also a small range within the consolidation channel forming roughly between 124.50 and 126. A break above 126 focuses on the 127.75 high, while a break below 124.50 focuses on the 122.90 support.