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EUR/JPY Forecast 17 Feb 2016

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EUR/JPY Forecast 17 Feb 2016
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Bullish EURJPY as it tests support

Since more than one week now the EURJPY sits on support in the 126-127 area and we need to consider this area as a possible bouncing one despite the bearish look in the last weeks.

The thing is that this is a cross and it is moving based on the differences between the two majors it represents, namely the EURUSD and USDJPY.

If the EURUSD is moving to the upside 1% and the USDJPY to the downside 1%, then the cross will stay flat. It means that in order to travel, the correlation between the two majors needs to be broken.

From a technical point of view, we’re looking at a possible leg of a triangle to the upside, wave d in green, and this is a corrective pattern. It can be simple or complex, but we do know it is corrective.

Judging by the fact that market spiked higher and then quickly retraced more than 100%, it means there is a flat pattern, and in this category it can only be an irregular one or an elongated one.

In both cases, the c wave must be an impulsive move, or a five wave structure to the upside and this is the reason why a bounce is due.

How to trade

It goes without saying that call options from the current 126.70-75 area are recommended for today’s expiration and if we see a move taking yesterday’s high at 128.17, a put should be traded with the same expiration as probably bulls will take profit after stopping weak shorts.

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.

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