EURJPY just climbed to the number one spot on my watch list. I mentioned this pair in yesterday’s weekly forecast, noting the two breaks that were needed in order for the pair to set up for what could be a major correction in the coming weeks.
The first of two breaks occurred during yesterday’s session when the pair broke below trend line support from the July low. This break first confirmed on the 4 hour chart and was followed by a daily close below the level.
From here traders can watch for a selling opportunity as long as the pair remains below former support on a 4 hour closing basis. A close back above this level would negate my bearish bias and would likely result in a retest of the 137.00 resistance level.
If the bears are able to get behind this move in the coming days, the 133.10 is a likely target. That retest would put the pair one step closer to confirming the larger head and shoulders pattern that has been forming since May.
EURJPY daily chart
A daily close below 133.10 would confirm the reversal pattern and set things up for what could be an extended move to the measured objective at 125.00 in the coming weeks.
That said, breaking the 133.10 level won’t be easy, nor will a potential 1,000 pip move materialize over the course of a few days or even a week. Therefore patience needs to be your ally here as any move to the downside will likely be met by several relief rallies along the way.
Summary: Watch for a selling opportunity as long as the pair remains below former trend line support on a 4 hour basis. Key support comes in at 133.10 with a break there confirming the larger head and shoulders pattern, which would expose 131.50 as a first level target.
