On Monday I mentioned that EURJPY may soon come into channel support at either the 137.90 or 136.70 area. In which case the idea of a long entry would become much more appealing.
However as we all know, movements in the Forex market are never scripted, which is why I always try to have a “plan B”. In the case of EURJPY, that plan B involved using the break of a descending channel on the 4 hour chart.
But before we get into the details let’s review the ascending channel that began on April 14th. This gives us two well-defined boundaries from which to construct a trade plan over the next several weeks. Of course we also have key horizontal levels that will play a role in that plan, which we will get to shortly.
Now for the details of the setup. It started just before yesterday’s FOMC statement as the pair broke above channel resistance on a 4 hour basis. By the time the dust settled at the end of the US session we had a bullish pin bar rejecting former resistance.
A 50% entry here was ideal but there may be a second chance in the cards for buyers. However in order to limit downside risk it’s important to wait for a daily close above the 141.00 area. This would confirm that weak hands have been shaken out and that the bulls are ready to step up and push the market higher.
Summary: Wait for a daily close above 141.00 and then watch for a retest as new support. Key resistance comes in at 142.30, 143.50 and 144.56.