Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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One of the five currency pairs in Sunday’s forecast was EURJPY. As of Friday’s close, the pair was sitting just above a confluence of support at 130.90.
However, I wasn’t interested in buying EURJPY. In truth, I had already sold the pair at 131.40 and again at 130.00 before I released Sunday’s post.
I shared these entries and my reasoning behind them inside the member’s community. The gist of that reasoning had to do with a weakening euro coupled with an S&P 500 index that looked ready to tumble.
You see, the Japanese yen is still considered a safe haven currency. That’s been the case for many, many years. So, when risk assets such as equities selloff aggressively, market participants tend to flock to the yen, driving the price higher.
That’s one reason why I sold EURJPY last week. The rest had to do with the euro as well as the way EURJPY was struggling to move higher from 131.00. Not to mention a healthy dose of intuition.
If you saw Sunday’s commentary, you know that 129.30 was the next support below 130.90. I even wrote that on Sunday’s EURJPY chart.
It’s no coincidence then that yesterday reached a session low of 129.33 before bouncing higher by more than 100 pips. That’s a big clue for those of us who trade price action using end-of-day charts (make sure your charts use a New York close).
How does the bounce from 129.30 help us? It helps because it illustrates the demand in the 129.30 region. Not because I want to flip from short to long, but because I may add to my short position following a daily close below 129.30.
That’s Technical Analysis 101. If EURJPY can close below 129.30 support, the area should begin to serve as new resistance. At the same time, as long as the market holds above 129.30, we could see bouts of strength like today.
Just keep in mind that 129.30 is by no means a perfect level. The pair has chopped around this area in the past, so take any breakdown here with a grain of salt.
Last but not least, don’t rush your entry. A volatile pair like EURJPY has a way of punishing those who lack patience. If the market fails to retest the 131.00 area as new resistance, it may be best to wait for a daily close below 129.30 or thereabouts.
As always, when in doubt, stay out.
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