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I’ve got my eye on this head and shoulders breakdown on EUR/JPY. Think we’ll see more bearish momentum or a quick pullback this session?

Risk-off flows were in play during the past few hours as economic data turned out mostly disappointing.

Before we look at potential entry levels, here’s what you missed in the last few hours:

Currency Snapshot

Major Forex Pairs Price Performance from MarketMilk
Major Forex Pairs Price Performance from MarketMilk

Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Economic Calendar:

  • German WPI and final CPI at 7:00 am GMT
  • Japanese preliminary machine tool orders at 7:00 am GMT
  • Swiss PPI at 7:30 am GMT
  • ECB economic bulletin at 9:00 am GMT
  • BOE Governor Bailey’s speech at 11:30 am GMT

What to Watch: EUR/JPY

EUR/JPY 1-hour Forex Chart
EUR/JPY 1-hour Forex Chart

Traders were in no mood to take on more risk in the Asian session as downbeat reports and commentary were in focus.

Apart from BOE head Bailey’s speech in the next session, there are no major catalysts lined up, so risk-off flows might carry on.

Safe-haven buying has been strong enough to push EUR/JPY below its head and shoulders neckline. Price is still pretty close to the broken resistance, so there could be room to catch more downside.

If you’re opting for a slightly better entry price, you could wait to short on a retest of the broken neckline instead of jumping in at market.

Stochastic is indicating oversold conditions after all, and the 100 SMA is above the 200 SMA to signal that there is some bullish pressure present.

The reversal formation spans close to a hundred pips, so the resulting selloff could be of at least the same height. Looking at the average EUR/JPY volatility indicates that the pair moves roughly 90 pips per day.

Whichever entry strategy you choose, just make sure you practice proper risk management and keep tabs on any changes in market sentiment!