On December 18th I pointed out a EURJPY selling opportunity.
The risk-sensitive pair had been trading within an 800 pip range since late February.
The range floor was 125.00, and the range ceiling was 133.00. With EURJPY trading at 127.80 on December 18th, shorts had nearly 300 pips to work with.
EURJPY broke our trend line support on the 18th and retested the area as new resistance on the 19th and 20th of December.
Fast forward to today, and the pair has reached our short-term target at 125.00.
In fact, EURJPY is at risk of breaking down even further should the pair close the day below the 125.00 handle.
One thing I like to do in situations like this is to use the prior range to identify a final target.
It’s the most straightforward method but is also highly effective.
First, we need to measure the distance between the exact range bottom at 124.90 to the range top at 133.10.
That gives us a height of 820 pips.
Second, we measure 820 pips below the former range bottom at 124.90.
That gives us a target of 116.70.
Once we have that figure, we can look for clues around the 116.70 region to see if it’s an area that could potentially trigger a reaction.
You’ll quickly notice that there is an open gap from April 21, 2017, near 116.35.
While it isn’t exactly 820 pips below 124.90, there are only 35 pips between the potential target and the open gap.
Considering the substantial distance we’re dealing with here, a 35 pip difference is inconsequential in my opinion.
There are also several swing highs around 116.35; further evidence that it’s a significant area for the EURJPY.
Keep in mind that a move of that magnitude will take weeks if not months to play out.
In summary, a daily close below 124.90 / 125.00 would expose 122.60, 120.70, 118.40 as well as the final target near 116.70.
Alternatively, a close back above 125.00 would negate the bearish outlook.
Save 40% on a Lifetime Membership to Daily Price Action – Ends January 31st!
Click Here to start profiting with Justin.