EUR/JPY bulls have had a solid run over the past few months, but the rally has lost a bit of steam this week. Is this a pause before another leg higher?
EUR/JPY Uptrend Play
This week I’m checking out the solid uptrend in EUR/JPY, where the bulls have benefited from recent positive economic sentiment updates from Europe (Eurozone businesses report strongest growth for two years in July) and the massive stimulus deal passed by the European Union last week.
And without major catalysts ahead from both Japan and Europe for the next couple of weeks, I think traders in the pair will continue to ride those themes higher, barring any major shifts in global risk sentiment, pandemic or geopolitical news.
I look to play the uptrend in EUR/JPY, but I will do so if the pair pulls back to the strong area of interest around just above the 123.00 major psychological level.
For my stop, I’m using the daily ATR as my guide, placing my exit point below the next major psychological level (122.00) that held as support in mid-July. And my max target will be just under three times my risk and the 2019 swing highs. Here’s what I’m doing:
Long half position on EUR/JPY at 123.00, max stop at 121.80, max target at 126.50
I’m only risking 0.50% of my account and I’ve got a solid short-term potential return-on-risk of over 2.91:1 to start. If triggered, I plan on adding to this trade/rolling up my stops if the pair rallies higher to maximize my potential gains/reduce risk, if the market themes down the road still dictate a bullish case.
Be sure to manage your risk and avoid overexposure.
What do you guys think? Are you watching EUR/JPY for a potential long position as well, or do you see a drop coming soon? Let me know in the comments section below!
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