Good afternoon Forex peeps! After touching 130.00 and rallying higher on continued rising risk tolerance last week, EUR/JPY started this week on a pull back of profit taking. This may be a chance to jump in the trend high on a nice and easy technical setup. Check it!
Usually, I have the 4 hour chart up, but I zoomed down to the 1 hour timeframe to give a clearer picture on what's going on. The pair has been on a fast rally since hitting 125.00 a few weeks ago, and testing 130.00 last week. We can clearly see a retracement down into the Fibonacci retracement area drawn on the chart. Stochastics are indicating oversold conditions on the 1 hour chart, and are indicating near oversold conditions on the 4 hour chart. I'd like to wait to see if the pair hits the 61% Fibonacci level before jumping back in long.
Fundamentally, the ECB cut interest rates last week and introduced quantitative easing actions for the first time. This week German and Eurozone CPI could push the markets one way or another. Inflation is forecasted to be much weaker than the targeted 2.0% and could spark further stimulus actions from the ECB. We will also see Q1 GDP on Friday. No major news expected on the calendar for Japan, so look for global risk tolerance to continue to influence price action in the Japanese Yen.
So, my trade idea is based mostly on technicals as the trend has been higher on this pair. Also, sentiment has been focused on that the economy may be getting "less worse." Regardless of how bad it is out there, as long as it is no longer falling off a cliff, investors seem to want to buy in on that alone.
I will go long at the 61% Fibonacci area and target previous highs. Here's what I am going to do:
Long EUR/JPY at 131.80, stop at 130.80, pt1 at 132.80, pt2 at 135.00
Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.
Stay tuned!
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