Hello and welcome to the latest issue of YTE Chart Snapshot. It’s great to be back at my desk following the summer break. The latest surge of volatility in the markets is of course warmly welcomed. In this article, I will be focussing on the EURJPY currency pair and I’ll be sharing the trade setups we are monitoring on the ‘trading floor’.
Firstly, let’s take a moment to look at the bigger picture. Looking at the Weekly Chart (Figure 1), following the break of support at 126.00, we can see that the EUR/JPY currency pair is in a well established down trending market. We note the cross of the Monthly 20 Exponential Moving Average (EMA) (shown in red on Figure 1) and the Monthly 50 EMA (shown in red), which in itself would be regarded as a bearish sign for the pair. As a trend trader, the only logical option is to be looking for short entries and I would like to explore some of the technical options available to enter such positions.
Staying with the EMAs for a moment, we can see that the market price is trading some distance away from the mentioned indicators, which would put the market in what I refer to as a “stretched state”. Furthermore, if we apply the Fibonacci indicator from the swing high at 141.00 from May 2015 to the low at 109.40 from June 2016, we can see that we have a confluence of potential resistance in the region of 125-126 (as shown with a green horizontal line). We expect to see a re-test of this region before a continued decline and will be using our short term techniques on lower time frames to execute positions within this area. Alternatively, if the pair does not retrace towards 125- 126, we’ll be looking for short term trend continuation positions. I note the bearish pennant formation that’s currently developing (highlighted by the pink triangle) with immediate support in the region of 112. If we were to see a break below this level, we would be looking for a pullback towards the same level of previous support to then provide resistance and consolidation on shorter timeframes to obtain entries using our Box Breakout and/or Viper Breakout techniques.