Hello Forex Traders,
The Yen and Aud weakness is dominating the Forex market at the moment. Yesterday’s article focused on discussing in particular the AUDUSD and USDJPY currency pairs. Today we will continue with this lineage and review these pairs in conjunction with the Euro and Pound.
The EURJPY is pushing into levels which have not been seen before since mid October 2008, more than 5 years ago. Price has accelerated out of its consolidation zone (purple box) the last 3 weeks with impulsive bullish weekly candles. Till how high can the EJ fly?
With long-term tops and resistances out of the way and really no top in sight until the highs during the summer of 2008 at 170, the currency will now have space up to the Fibonacci targets.
To enhance our chart with targets we must first place the Fibonacci tools:
1) When placing a Fib on the strongest part of the uptrend, dating back from 13 of November 2012 up to 6th of February 2013, the currency stopped shy of the 38.2% Fibonacci retracement level. However, the targets (-0.18 and -0.272) of that Fib were nicely respected by price.
2) When placing a Fib on the ensuing up move, the currency stopped directly at the 61.8% Fib retracement level.
Now we are able to judge that the targets are the -61.8% Fibonacci levels at 143.15 and 144.60. The latter has the most importance. Price has a high likelihood of “respecting” these targets by either going sideways or making retracement, but could easily continue to higher levels after that. By no means do I imply that these levels are the maximum targets. If anything, they are potentially the minimum I expect.
If you are in an EURJPY long, then you know the levels which I am looking for to reach. If you are not in any uptrend trade, then waiting for a pullback always make sense. Whether price will make a strong pullback before reaching the above mentioned targets is uncertain. Forex traders might need to zoom in to lower time frames such as the 1 hour chart and take break outs of chart patterns in order for them to capitalize on the breakout scenario. Of course any bigger pullback before reaching the targets should have a high chance of finding support at the broken resistances.
When the same Fibonacci levels are used for the GBPAUD, Forex traders are then able to see that the -61.8% Fib targets are at 1.8313 and at 1.8470. These are by no means necessarily end stations for this uptrend, although they could be. We will need to monitor how price behaves when it reaches those target levels (corrective downside could spell uptrend continuation, whereas impulsive downside could mean reversal).
Similar to the EURJPY, the GBPAUD might not see a bigger retracement either before hitting the mentioned targets. When looking at Fib retracement levels of the 4 hour chart, the retracements have so far been to a 23.6% Fib (very shallow) and 38.2% Fib (shallow). Here too trading the breakouts on lower time frames could be ideal until the currency reaches the bigger targets. Not so long ago there was a recent break out (blue arrow), or strike as we call it in our trading room. A hook back to that broken consolidation might a great retracement (or boomerang in our trading room) for more upside.
Are you in the EURJPY, GBPJPY, EURAUD, or GBPAUD? If yes, what are your targets? If no, what is your plan?
Thanks for sharing this article and Good Trading!
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