I just wanted to give you guys a quick update on this trade… as I had promised!
With the ECB rate decision behind us, I think we’ve eliminated some of the event risk surrounding this trade.
But what sucks is that yesterday’s ECB rate statement didn’t turn out to be the euro-bearish event that I thought it would be.
ECB President Mario Draghi didn’t even mention the euro zone’s recent string of weak economic data, and he didn’t drop any clues about further easing (rate cuts) in June, either!
.Apparently, the markets took this as a sign that the ECB remains optimistic for the economy, and in turn, it provided support for the euro.Sadly, it also kept EUR/JPY from hitting the 105.00 support zone, where I was considering setting up a position.
If you take a look at the pair’s daily chart, you’ll notice that yesterday’s candlestick formed a solid doji, indicating that sellers may be losing momentum. A sure sign to go long, right? Not quite.
I am still concerned about developments on the 4-hour chart. If you take a look at it, you’ll see that price has formed lower highs and EUR/JPY didn’t quite reach the 105.00 handle. I don’t know about you, but I think these could be signs that the pair still has a bit of room to fall.
So what’s a monster to do? Easy – stay on standby!
I think the setup that I spotted on EUR/JPY is still very much valid, but it’s just not yet ripe for the picking. For now, I’ll continue waiting for a more solid test of the 105.00 area.
When the price hits that sweet spot is when I’ll strike, but I haven’t quite made up my mind on whether I’ll be going long or short. I’ll wait ’til the market gives me clearer signs before I commit to a bias.
In the meantime, I’mma chill on the sidelines! But I’ll be sure to keep you guys posted on any new developments on this trade.
Thanks for following, fellas! Peace out!
I’ve been spending the past couple of days looking for the best setup possible using my trading framework and we’ve got some interesting developments happening right now on EUR/JPY.
After hitting a high of 108.00 a couple of weeks ago, the pair has dropped and is now approaching the 105.00 handle.
Not only does this line up closely with the bottom WATR (104.96), but this also happens to be a major support area from two weeks ago.
Now normally, I may have taken this setup blindly and set orders at 105.00. However, I’m a little concerned about whether this support level will hold or not. First of all, we’ve got the ECB rate statement due later during the London session. Who knows what they might say!
Second, I also scrolled back and noticed that there’s a huge head and shoulders formation forming on the daily chart of EUR/JPY and that price is about to retest the neckline.
In case you skipped the head and shoulders lesson in the School of Pipsology (and if you did, shame on you buddy!), then let me remind you that a head and shoulders formation is a bearish formation!
If we get a dovish statement at today’s ECB statement, it could send EUR/JPY right through the neckline!
So for now, I’m going to sit back and wait for the results of the ECB statement. If I get candlestick confirmation that the 105.00 handle and the neckline support are holding, I will buy at the market, putting my stop just below the neckline.
On the other hand, if we see a bearish marubozu candle close below the neckline, it could potentially to a multi-hundred pip drop, which is more than enough for me to join the short bandwagon!
So stayed tuned, my cross-currency fanatics. I’ll be back tomorrow with an update on this trade and my decision as to whether I’ll be going long or short!
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