It’s the middle of the week, fellas! No better time to look back on the past few days and discuss what’s to come in the next few, right? Let’s make some battle plans, fellas!
After that steep drop we saw early in May, GBP/JPY has consolidated lately into a sweet inverse head and shoulder setup. Clearly, the pound hasn’t been as affected by euro zone sovereign debt problems, which is why GBP/JPY hasn’t dropped off as much over the past few days as EUR/JPY.
For now, the pair is finding strong resistance at the 133.00 handle. By strong, I mean Arnold Schwarzenneger in Predator strong. Okay fine, not THAT strong, but it has been holding pretty well over the past week.
Looking at our ultra cool Forex calendar, the only red flag I see coming up is today’s revised GDP report. And even then, no revisions are expected from the preliminary 0.5% figure. So we may see more consolidation for the rest of the week, with resistance at 133.00 holding.
With that in mind, I may consider going short on another test of 133.00. If I do, I’ll be looking to make a day trade only, as I wouldn’t be comfortable holding a short position on this pair for too long.
If you’ve been following me (I hope you have!), then you probably already know I’ve got a bearish bias on EUR/JPY, and that I’ve been looking to short it for a while now.
I mean, c’mon, who wouldn’t wanna hop on the euro bear bandwagon after what’s been happening in the euro zone??? With Greece in the spotlight, and credit rating agencies dishing out downgrades like crazy, I’ve been scrambling to get my hands on a euro short position.
So you can imagine my frustration when I woke up this morning and saw the beautiful setup that I missed while I was dreaming of vast fields of bunnies! A perfect shooting star formed right beneath the 116.00 major psychological handle, which just so happened to be in the same area as the 61.8% Fib level. The pièce de résistance? A bearish divergence!
Right now, it seems as though the bears will remain in control of EUR/JPY. They seem to be picking up steam and recently just blew past the 115.50 support level.
Although the pair may find a bit of support at around 115, if the bears keep pushin’ on at this rate, it looks like EUR/JPY could continue all the way back down to 114.00. After all, there aren’t any big euro zone events scheduled for the rest of this week, so I don’t see a reason why market sentiment on the euro should change.
But don’t take my word for it, that’s just my opinion, guys! I’d love to hear what you have to say. Hit me up with some comments below or through Facebook and Twitter so we can formulate a battle plan together! Peace!