EUR/JPY may have put the final changes on a correction. There is a confluence of support and wave relationships coming in near 114.70 to 115.50 including:
- Support trend line connecting July 2016, Sept 2016, October 2016 lows (near 115.50)
- 78.6% retracement of October 2016 to December 2016 up trend (115.11)
- 0.618 extension of March 12-April 4 down trend (114.69)
- 1.618 extension of March 12-23 down trend (114.68)
EUR/JPY Daily Chart
Those multiple levels above appearing in the same area suggests a bounce is likely. We will use a break of the trend line near 116.60 as a clue the mood of the market may be changing.
EUR/JPY 4 Hour Chart
Trader sentiment has been growing net long since early December when the pair was trading near 122. In early December the sentiment reading was 32% long (or -2.1) and has increased to 72% net long (+2.5). Sentiment is a good contrarian signal so we will watch and see if it begins to decrease. If it decreases upon a price break of 116.60, then we will have confirmation a breakout higher. Read more about trading strategies using sentiment with this sentiment guide.
Risk can be set just below the recent swing low. Earlier this week, EUR to JPY achieved a low of 114.85 and that level could be a conservative risk level. We are targeting new highs above 124 and possibly higher.
Join Jeremy in his Monday US Opening Bell webinars to discuss this market.
Interested in learning more about Elliott Wave Theory? Watch these videos on trading with Elliott Wave.
Lastly, check out our longer-term forecast for EUR and JPY.
---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU
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