Breaking up or down? EUR/JPY could bring traders 400-800 pips
EUR/JPY – Will it break up or down?
EUR/JPY has recently made higher highs and higher lows and is currently seated on a consolidation range of about 160 pips, with long-term capital down A 132.281, B 115.482. Currently, the pair has reached the .618 Fibonacci retracement level, which leads to the D Fibonacci level at 105.10
On the upside, we have a Gartley A at 112.066, B 123.175 and D 130.040 and a sub up at 114.853, B 124.54 and D 130.528.
Now the question all traders are asking is: which side will market take it? To be honest, it’s hard to tell. Right now, we are playing the waiting game, and if price breaks up the consolidation range and closes above the 125.50 area, we could head to the Gartley and sub up D Fibonacci levels, which could provide further +400 pips in gains to the upside.
On the downside, we haven’t seen the test of the previous breakout yet, plus there is a gap which is still open from April 20th at 116.941 and usually, (I’d say 80% of the time), the gaps are filled within 24-hours or in the next couple of days but,this hasn’t happened yet and if there is one thing that is always true in the forex market, it’s the market has an elephant memory — it never forgets areas which are unfilled and other levels such as pivot points (which I’ll discuss in another topic.)
What does the chart say?
If you look at the yellow dotted rectangular zones in the chart above, the breakouts have been tested twice, and on the third breakout, (which was after the first round of French elections), it hasn’t been tested yet, which could provide us with 400 to 800 pips worth of movement if it comes to test this area.
Technically speaking, the pair is overbought on the weekly and monthly time frames, that could start pushing price lower for a correction and possibly filling the gap, but you as a trader, need bias confirmation before pulling the trigger, with the help of different technical and fundamental strategies that are preferably time-tested, you can trade with further confirmation and reduce your risk by always applying trade management.
Looking back at the chart, we can also see a bullish crown formation on the way, it’s currently looking to form the right tip of the crown, which can extend to the left tip of the crown at around 117.00 area, which is also near the gap zone.
My personal trade plan is to wait for a break above 125.50 area, with a decision bullish candlestick formation, or a retest to look for buying opportunities on the smaller time frames, and if breaks below 123.00 zone with a decision bearish candlestick formation, I’d like to look for selling opportunities on the smaller time frames. Remember: The longer the consolidation is, the stronger the breakout will be.
Happy pips everyone!