A week ago, I had my one good eye locked on the break-and-retest play for EUR/JPY but I wasn’t sure if the pair would much of a pullback. Now that it’s down to my entry area, do you think I should hop in at market? In case you missed it, make sure you check out my EUR/JPY watch list idea first!
The pair has been selling off in the past few days and has it made it to the 61.8% Fibonacci retracement level, which coincides with the broken channel resistance, 120.00 major psychological level, and the bottom WATR for the week. I guess you could say that this is the line in the sand for a correction play as a break below this area could indicate that the downtrend is gaining traction once more.
I’m thinking of waiting for a bit of a bounce just to get some bullish momentum on my side before going long. I’ll set a buy stop order above current market levels to catch a potential rally off these inflection points and I’ll aim for the top WATR near 122.00 as my initial target.
Stochastic is already indicating oversold conditions and seems ready to pull up, possibly drawing euro bulls back to the game. However, risk aversion has been in play yesterday as market players are biting their nails ahead of the U.S. healthcare vote. The terror attack in London has also weighed on European currencies in recent trading sessions.
Fundamentals still support euro gains, though, as the ECB has shown a pretty significant shift in stance to acknowledge the improvements in the economy. Meanwhile, a vote to repeal Obamacare could renew demand for the dollar and shore up U.S. bond yields, which would then be bearish for the Japanese yen.
I’m thinking of placing my orders before the U.S. session starts and the action heats up in Congress, but I’m also wary of potential spikes here and there that could quickly trigger my trade and stop me out. Think I should sit this one out instead?
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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