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EUR/JPY Technical Analysis:First Two Profit Targets Reached on Short Setup

EUR/JPY Technical Analysis:First Two Profit Targets Reached on Short Setup

2015-10-15 17:58:00
James Stanley, Currency Strategist
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Talking Points:

  • EUR/JPY Technical Strategy: Short, first two profit targets met, 3rd target at 134 remains.
  • EUR/JPY has responded to confluent resistance, but remains confined within a longer-term symmetrical wedge.
  • The longer-running symmetrical wedge still highlights ‘big picture’ congestion in the pair.

In our last article, we looked at a short setup in EUR/JPY while price action was confined within a symmetrical wedge pattern, using the 136.37 Fibonacci level as a resistance point for stop placement. Since then, prices have moved lower and cleared the first two profit targets at 135.32 and 135.00, and the third profit target at 134.00 remains open.

Moving forward, finding additional short-setups while price action remains confined within this wedge can prove challenging. We’re more than 160 pips away from the previous swing-high, and the bottom side of the symmetrical wedge formation projects to approximately 134; meaning an attractive risk-reward ratio would be difficult to attain on the short-side of EUR/JPY unless the trader wanted to plant profit targets below the symmetrical wedge.

A conditional stance could be warranted with current price action. Traders looking to go short could wait for the bottom-side of the wedge to break before looking to trigger the position; and this could open the door for profit targets at 133.56 (the 50% Fibonacci retracement of the most recent major move, taking the April 2015 low to the June 2015 high), 132.00 (the 50% Fib retracement of the ‘big picture’ move, taking the 2008 high to the 2012 low), and then 130.00 (major psychological level).

Alternatively, traders looking to get long could make a play off of the 135 psychological level that price action is currently resting upon. Traders wanting to treat a long position aggressively could look to lodge stops below today’s daily low of 134.77 with profit targets cast towards 135.32 (38.2% Fib retracement of the most recent major move), 135.50 (minor psychological level), 136 (prior price action swing-low), and then 136.63 (76.4% Fibonacci retracement of the ‘secondary move,’ taking the 2012 low to the 2014 high).

The top-side of the symmetrical wedge is currently projecting to the 137.50 range, which is also the 23.6% Fibonacci retracement of the most recent major move. Should this level come into play, a more aggressive short position could become attractive. But until then, we’re trading in congestion and the trader’s strategy should account for this.

EUR/JPY Technical Analysis:First Two Profit Targets Reached on Short Setup

Created with Marketscope/Trading Station II; prepared by James Stanley

--- Written by James Stanley, Analyst for DailyFX.com

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