Trade Watchlist: EUR/JPY Break and Retest

Could this be my chance to short the euro on a pullback? EUR/JPY just made a break below that symmetrical triangle I had been watching but seems to be making a retest.

EUR/JPY Trade Idea

If you keep tabs on my Weekly Watch blog posts, you’d know that I’ve got my one good eye locked on this EUR/JPY symmetrical triangle pattern for quite some time. Price broke to the downside after the BOJ monetary policy statement then dipped close to the 112.00 mark near the bottom WATR before making a correction.

Applying the Fib tool on the swing high and low on the 4-hour time frame shows that the 50% retracement level coincides with the broken triangle support, previous week low, and a resistance-turned-support level which might flip back to holding as resistance once more.

EUR/JPY 4-hour Forex Chart

EUR/JPY 4-hour Forex Chart

I’m hoping to catch a quick bounce off this 114.00 area, depending of course how today’s euro zone PMI release turn out. Small declines are expected for the manufacturing and services industries of France and Germany so I’m thinking the shared currency could resume its slide if the numbers turn out as expected.

Yen traders don’t seem to be too bothered by the BOJ’s yield curve targeting framework and additional stimulus plans, as the Japanese currency has resumed its rally a few hours after the central bank announcement on Wednesday. Bulls probably just booked profits when Japanese banks were closed for the holiday yesterday but could be ready to reopen their long positions now that Japan’s flash manufacturing PMI indicated a surprise return to industry expansion for September.

My one concern about this trade is that the downside could be limited to the 111.00 major psychological support, which means that I might need to be tight about my stops in order to maintain a decent R:R. If I’m able to hop in around the 114.00 area, I can still keep my stop loss past the top WATR while going for roughly a 1.5:1 return-on-risk.

As you’ve probably guessed, I haven’t set any actual entry orders yet since I want to wait for the actual PMIs to be printed before shorting. I hope I won’t be too late in case a sharp drop does happen!

As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups. I’ll keep y’all posted through my Twitter account if I’m making any adjustments.

Q2 2016 Trading Performance Review
Read about my trading framework
Like my Facebook page


These are some of our favorite trading books, and BabyPips.com receives a small credit from any purchases through the Amazon links above to help support the free content and features of our site…enjoy!