EUR/JPY Rallies to 104.00, Look for Rollover

Thursday, Nov 15, 2012

In an overall choppy market I will look for prior resistance levels (after a rally) for where the bears will step in to take advantage of possible exhaustion. I’m sure plenty of bears looked for the EUR/JPY to sink back through 102.00 (it couldn’t) and now with 104.00 acting as near-term term resistance, bears will once again look for the pair to sink lower through 103.50. I will explain which time frame to watch now…

The EUR/JPY has continued to rally higher - driven by yen weakness - for a second straight session. Since this pair has not Directional Bias I continue to be hesitant to commit to trades on time frames longer than 30-minutes. In fact the daily EUR/JPY is in such a chop I will look for exhaustion between the 104.00 and 104.50 major psychological levels which line up with past, pivotal highs at 103.98 and 104.58.

Past performance is not indicative of future results

In a wide, choppy market, I look for exhaustion since the lack of bullish or bearish organization often leads to prices holding within the trading range which is this pair is wide, further raising my expectations for a stall (and subsequent reversal as prices sink back into the trading range).

 

The daily chart distribution fade set up would be aggressive (as all distribution fades are) and the exhaustion area is wide – over 50 pips – so an aggressive entry would trigger at 103.98 and an additional, conservative entry would trigger up at 104.50. The point of validity (stop loss) would be above the range high at 104.58 which puts it at 105.68.

In the current fiscal cliff/risk averse/continued Greece and Spain concerned- environment I would expect more euro weakness and yen strength however the recent political turmoil in Japan has turned the yen-as-a-risk-barometer on its head.

Because of that I want to stay nimble and that means at 30-minute chart or less. That brings me to the 15-minute chart.

Past performance is not indicative of future results

The 15-minute is (yet again) poised for a Wave Reversal where a break of the current market trend could trigger a short sell. It’s important to notice that the angle of the 34EMA Wave is at a “two to four o’clock” angle which is transitional and the entry literally should look and feel like the market is “rolling over”. If the Wave should flatten (as it did with the last Wave Reversal entry) this strategy is no longer valid. Look for the CCI to plot below the -100 line for confirmation of a break through the 34 period EMA low and 50 period SMA close. 

 

As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.

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Posted By: 

Raghee Horner

Raghee Horner, chief currency analyst for IBFX, provides her personal daily trading tips and insights through Dailyforextradingedge.com. An experienced trader with over fifteen years in the markets, Raghee is the co-founder of EZ2Trade Software and has taught her brand of technical analysis and charting strategies to students all over the world. She is an international author and has taught currencies, futures, and equities trading for over a decade.
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