I’ve already got one long euro play going on, but I’ve got my eye on another one with this break-and-retest situation on EUR/JPY. Think it could still reach my buy area?
EUR/JPY Trade Idea
With price breaking above the 4-hour channel resistance and also making its way past the longer-term descending channel visible on the daily time frame, I’m thinking that EUR/JPY could be on the verge of a prolonged climb. The BOJ didn’t really say anything new in their latest rate decision so I’m thinking bond yields and market sentiment could keep pushing yen pairs around.
Not only did ECB Governor Draghi sound less dovish in last week’s policy statement, but a couple of central bank officials also echoed his upbeat view in saying that there have been several notable improvements in the euro zone. ECB official Nowotny even brought up the idea of tightening by saying that they might hike deposit rates first before increasing the benchmark rate or tapering asset purchases.
I’m seeing a potential correction before the pair heads further north, though, possibly making its way back to the broken channel resistance near the 50% Fib and 120.50 minor psychological mark. Stochastic is starting to make its way up, which means that bulls might be excited to jump back in, while the bottom WATR and 38.2% Fib at 121.00 appear to be holding as a floor.
If I’m able to go long, I’ll set my stop back inside the channel and below the 61.8% Fib at 120.00. I’ll aim for the swing high near 123.00 initially but I’ll be ready to adjust my target higher and trail my stop to lock in gains along the way. I’ll be risking 0.5% of my position on this one for a potential 2:1 return-on-risk.
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.
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