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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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Two weekends ago on October 7th, I pointed out an area on EURJPY that was likely to break down within the next few sessions. The pair had reached the 131.00 support area, but buyers were having trouble pushing prices higher.
Based on the way the risk-sensitive EURJPY was reacting to 131.00, a breakdown seemed imminent. I went short above 131.00 in preparation for the reversal and also mentioned my idea in the member’s area.
The very next session on October 8th produced the selloff we were waiting for. By October 9th, the first target was reached at 129.30 and has held as support ever since.
However, just like the price action above 131.00 support, the movement at 129.30 suggests the next leg lower is imminent. Although EURJPY buyers are managing to hold onto support as I write this, I wouldn’t be surprised to see a breakdown within the next week or two.
If sellers can manage a daily close (using a New York close chart) below 129.30, it would expose the next key support at 127.00. A break below 127.00 would open the door to the range low at 125.00.
To be conservative, you may want to use 129.20 or even 129.10 instead of 129.30 as the level sellers need to get past. As I’ve mentioned in other posts, it’s often better to view support and resistance as areas or zones rather than exact prices.
You may recall from the October 10th commentary that I mentioned I was bearish while EURJPY was below 131.00. Since that time, the pair has stayed well below this level. In fact, buyers haven’t managed to breach 130.50 since falling below 131.00 on October 8th.
That means my bearish bias is still intact, but I do need to see sellers win the battle at 129.10/30 before I can confidently say the 127.00 handle is exposed.
Alternatively, a return to the resistance area between 130.50 and 131.00 could produce a selling opportunity for a move back to 129.10/30.
Remember that having yen exposure opens you up to more volatility than something like EURUSD. Given the plethora of volatility-producing events and uncertainty around the globe, it may be a good idea to keep initial bets small.
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