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.