EUR/JPY Bounces 120 Pips From Weekly Low
EUR/JPY may have put the final changes on a correction. There is a confluence of support and wave relationships coming in near 114.70 to 115.50 including:
- Support trend line connecting July 2016, Sept 2016, October 2016 lows (near 115.50)
- 78.6% retracement of October 2016 to December 2016 up trend (115.11)
- 0.618 extension of March 12-April 4 down trend (114.69)
- 1.618 extension of March 12-23 down trend (114.68)
Those multiple levels above appearing in the same area suggests a bounce is likely. We will use a break of the trend line near 116.60 as a clue the mood of the market may be changing.
EUR/JPY 4 Hour Chart
Trader sentiment has been growing net long since early December when the pair was trading near 122. In early December the sentiment reading was 32% long (or -2.1) and has increased to 72% net long (+2.5). Sentiment is a good contrarian signal so we will watch and see if it begins to decrease. If it decreases upon a price break of 116.60, then we will have confirmation a breakout higher. Read more about trading strategies using sentiment with this sentiment guide.
Risk can be set just below the recent swing low. Earlier this week, EUR to JPY achieved a low of 114.85 and that level could be a conservative risk level. We are targeting new highs above 124 and possibly higher.
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Interested in learning more about Elliott Wave Theory? Watch these videos on trading with Elliott Wave.
Lastly, check out our longer-term forecast for EUR and JPY.
---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.