Sorry, you need to enable JavaScript to visit this website.

EUR/JPY Forecast 10 Feb 2016

You are here

EUR/JPY Forecast 10 Feb 2016
5/5 of 2 ratings

The EURJPY pair in triangle pattern

The EURJPY pair above is moving in a contracting triangle pattern that forms at the end of a complex correction and what is important here to remember is that the pattern is forming on the daily chart.

Taking into account the fact that all legs of a contracting triangle are corrective in nature, this wave d to the upside should be a tricky one both for bulls and bears.

However, bulls should prevail here in the sense that price cannot go much lower and if we were to put a fundamental reason to this trade then the ECB March meeting should be extremely important as most likely the European Central Bank will cut the rates further into the negative territory.

Negative rates have the effect of lowering the currency and as a consequence the Euro should drop all over the dashboard, with all pairs being affected. But this is not possible on the EURJPY as the pattern above should have wave d retraced at least 50% of the distance traveled by the previous wave.

How to trade

This means we should move higher in the cross before the ECB March meeting and the dip into this 129.20 area looks to be a good opportunity for buying a call option.

As for the expiration date, aggressive traders should go with end of day expiration but considering the time frame this one should be considered a risky trade.

A more conservative approach would be to trade a call option from this 129 area with end of week (Friday at the close) or even end of month as the potential for a bounce increases with each and every day that passes.

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.

You may also read