EUR/JPY, GBP/JPY Primed as Risk Aversion Themes Yet to Abate
Forex Talking Points:
- DailyFX Quarterly Forecasts have been updated for Q3, and are available directly from the following link: DailyFX Trading Guides, Q4 Forecasts.
- If you’d like more color around any of the setups below, we discuss these in our live DailyFX webinars each week, set for Tuesday and Thursday at 1PM Eastern Time. You can sign up for each of those session from the below link:
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EUR/JPY, Close Remainder, Reverse Stance
Earlier this month, I looked at a two-sided setup in EUR/JPY. The bullish trend from Q3 was on pause as a bull flag formation had built; but within that bull flag formation was a bearish setup as a shorter-term descending triangle formation had built.
Upon the next weekly open, prices quickly broke-down and ran to the first target of 130.00, and bears continued to push last week with a fresh monthly low established around 129.20. But – little ground was made below that level, and three different attempts to breakdown were thwarted as bulls continued to show support. That’s lasted into a fresh week and now prices are trading above the bearish channel that makes up that bull flag formation, and this opens the door for bullish potential in the pair.
Stops can be set below last week’s low around 129.10 to take on a little more than 90 pips of risk, and initial targets can go to 131.25 for a slightly better than one-to-one risk-reward ratio to the initial target. Stops can go to break-even at that first target, with secondary targets directed to 132.00, and tertiary targets at 133.00.
For those that would like to move forward with a bit more confirmation of bullish themes returning, price action breaking of the prior support zone around 130.58-130.77 could make that theme look more attractive.
EUR/JPY Four-Hour Price Chart
Chart prepared by James Stanley
GBP/JPY Resistance Potential 148.55-149.05; Bullish Beyond 149.50
Last week’s risk aversion pushed GBP/JPY down to a fresh monthly low, but bears were unable to make much ground below 146.50. But, this does give a technical lower-low that came-in after a lower-high. This may be the early stages of the impasse that’s built in the pair over the past month beginning to give way.
This opens the door for another iteration of lower-high resistance, and just above current price, there is an interesting zone of resistance potential. This runs from 148.55-148.69, each of which are 23.6% Fibonacci retracements from long-term major moves, and this can be connected with last Friday’s swing-high around 149.00 as traders look for lower-high resistance. Stops can be set above the October swing-high at 149.51, and if this does not hold the highs, bullish strategies can start to be favored as prices re-engage with the 150.00 psychological level.
GBP/JPY Four-Hour Price Chart
Chart prepared by James Stanley
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
Forex Trading Resources
DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.
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--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.