The EURJPY has tremendous potential of wide open space for a continuation of its downtrend – although it does need to break one crucial level before the road is clear. Once the support level is out of the way, the EURJPY could be ready for a free fall to lower levels. For example, the main Fibonacci target is a whopping 650 pips lower than current price. Take a look at the rest of the article to get all of the angles and details regarding this potential trade setup.
Since the break of the support trend line (green) the EURJPY has been consistently posting bearish weekly candles with only 3 exceptions. However the 3 bullish candles were small and insignificant and never really threatened the downtrend continuation. Last week’s candle was decisively bearish and this week is close to being bearish as well.
There is a big obstacle though which traders should be aware of: the weekly bottom at +/- 136.26. Price has dangerously approached this key support level, which can stop a trend cold in its track. A break of this bottom is needed before a bigger down trend continuation can be expected.
WIDE OPEN SPACE
The wide open space is especially below the weekly bottom. Once that level cracks, the next targets are the -27.2% and the -61.8% Fibonacci targets. Those price levels are 133.76 and 130.50.
When analyzing the bigger structure, the question is how far the Euro could retrace versus the Yen? If the entire upside is retraced, then price could go back towards the 23.6% Fibonacci level at 133.50, the 38.2% Fibonacci level at 126 or the 50% Fibonacci level at 120 (purple Fib).
Price is too close to the bottom to trade it now. Trade details are therefore not available as price still needs to break below the bottom. And no, I will not be placing a pending order at the bottom break, but rather use lower time frames (1 hour – daily) for entry and trade management purposes. Waiting for decisive candles during breakouts and momentum continuation is a good technique to employ (yellow circle). Treat this article as a trend warning for the moment. As long as price stays below the resistance lines (orange and brown), the downtrend remains strong.
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Thanks and Happy Trading!
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