Confluence, baby! I’m seeing several support levels lining up neatly for EUR/JPY, but I’m still wary of euro zone fundamentals. Think we’ll see a bounce right here?
Long EUR/JPY Idea
Is it just me or is this setup too good to be true? I’ve had my one good eye locked on this potential trend play because, not only does the 61.8% Fibonacci retracement level line up with the ascending trend line connecting the recent lows, but it’s also around a former resistance area and the 131.00 major psychological mark.
Stochastic is also indicating oversold conditions on this time frame, which means that sellers are tired and it may only be a matter of time before buyers return. If that happens, EUR/JPY might make its way back up to the swing high just past the 134.00 mark or higher.
I haven’t set any long orders yet, though, since euro zone fundamentals seem to be overshadowed by the outcome of the German elections for now. You see, while Merkel emerged with a victory as expected, her political party has to contend with coalition talks with their rivals. Apart from that, the surprisingly strong support for the Alternative für Deutschland party is adding more uncertainty to the mix.And even though I’m yen bearish due to the snap elections and the BOJ’s easing bias, I’m also a bit worried that the lower-yielding currency could bank on its safe-haven appeal if tensions with North Korea continue to escalate. Last I heard, the North Korean foreign minister claimed that the U.S. has declared war through Trump’s latest theatrics.
With that, I’m inclined to sit on my hands for now while closely guarding this setup and waiting for reversal candlesticks or for stochastic to turn higher once price tests the trend line and 131.00 mark. After all, there are a few medium-tier reports from the euro zone that could put the spotlight back on improving fundamentals while Japan has its data dump on Friday, so I’m in no rush to hop in.
If I’m able to go long around 131.00-131.25, I’m planning on setting my stop below the 130.00 handle and aiming for the swing high initially. What do you guys think of my game plan?
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