Following unsuccessful attempt to rebound, the Yen pairs had another day of losses on Tuesday. Since I started this sequence of articles focusing on the EUR-JPY, that is the pair I will continue track for now. After all, it displayed the most prominent signs of being oversold, so it was most likely to have a significant correction. It rebounded to just under the 120.00 threshold, but failed to reach that level. In a short order, the price fell through the new support of 118.87, discussed in the last post, and continued lower.
I was using the 15M chart – the volatility is high enough to produce decent moves even on this small time frame. With entry at 118.84, this next leg down brought 90 pips in several hours and the EUR-JPY started to consolidate. This may have achieved the immediate potential of trading 15 M chart, and the focus must shift to a larger magnitude graph.
The hourly chart shows another important development. Here the price pulled back to the previous support of 117.60. In addition, the EUR-JPY is also testing the 100 SMA. This combination should be a strong obstacle and a real test of this pullback. In the perfect world, I would like to see a consolidation, lasting perhaps as long as a day, before the EUR-JPY tries another bearish breakout. I am ready to sell it again under this support, but the objective will have to be bigger, about 150 pips. After all, risks are increasing now, too. This means that the trade, if it happens, will probably last longer than the previous two transactions. Should the price action indeed unfolded as scripted (a big “if”), the 4H chart will be next to use for additional trades.
Mike K.