Hello Forex Traders,
Yesterday’s article reviewed the major currency pairs such as the GBPUSD, EURUSD, and USDJPY. One of the most interesting observations was the potential for the USDJPY to resume its uptrend: the USDJPY was back at the daily chart 38.2% Fibonacci retracement.
Will the UJ indeed resume its uptrend at the 38.2% Fib?
And if it does, could other Yen crosses such as the EURJPY and GBPJPY follow suit?
EURJPY DAILY CHART
The EURJPY raised 1,500 pips in value from +/-131 to +/- 146, which it did in tremendous impulsive (green channel). That (green) channel took price all the way from the bottom of the huge daily channel (blue) to the top of it.
After a sturdy correction back down, there are reasons to expect support at this point:
1) In the meantime price is back in the middle of the channel, which is always a potential bouncing spot;
2) Another potential reason for expecting support at this point is the fact that price has reached half way the 38.2% and 50% Fibonacci retracement level of that impulsive move up (green channel);
3) The Oscillator has returned to the zero line on the daily chart;
4) Yesterday’s daily candle is showing lack of control for the bears. Whereas Friday’s daily candle was a big bearish candle which closed near the low (indicating that the bears remained in control till the end of the day), yesterday’s daily candle did attempt to continue but price got rejected (wick at the bottom) and close bullish.
These are all good supporting elements for a potential upside.
However, the daily chart is still making lower lows and lower highs.
What needs to happen before this upside has more potential?
EURJPY 4 HR CHART
When zooming into a lower time frame, such as the 4 hour chart, the same downtrend is valid. Here too price is making lower lows and lower highs (purple and magenta trend line).
But price action is moving choppily downwards. It is making lots of ups and downs that overlap each other and the angle of the entire structure is shallow (between 5 and 10 degrees). This is usually a sign of a correction unfolding.
Are there any such signals unfolding?
1) The 4 hour chart also has a massive pin bar at the bottom. This candle’s close is bullish and near the high and the wick is the majority of the candle (lots of buying pressure in that candle).
2) The oscillator on the 4 hour chart has turned green.
3) There is some (smaller) divergence between the bottoms.
EURJPY BREAK OUTS
The best thing a Forex trader can do is to wait for confirmation. The best confirmations in my opinion are either:
a) A break above the resistance trend line (magenta) and moving averages for a break out trade back into the weekly/monthly uptrend. A break above would mean a decent probability that the daily and 4 hour trend are finished.
b) A bounce off of the 50% Fibonacci retracement level (red).
Once a break or bounce back up occurs, the targets for the EURJPY are as follows:
1) The immediate top at 145.70
2) The Fib confluence at +/-149
3) The Fib confluence at +/-155
4) Another Fib confluence at +/-162-164
Are you looking to trade the EURJPY?
Thanks for reading and sharing this article!
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