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EURJPY Opens Below Ichimoku – Bank of Japan Preparation


Sep.18.2016

EURJPY Opens Below Ichimoku

After an exceptionally volatile Friday, EURJPY opens below Ichimoku on Monday's Sydney session. We have BoJ and economic data from EU to look forward to this week. Read on for an Invest Diva style technical and fundamental analysis. Don't forget to read my book if you are new to these kinda stuff.

EURJPY Opens Below Ichimoku - Kiana Danial Reports for Capital Index EURJPY Opens Below Ichimoku - Kiana Danial Reports for Capital Index

 

EURJPY Opens Below Ichimoku - Technical Analysis

The EUR/JPY pair has been on an overall down trend since June 2015. It first broke below the Ichimoku cloud on the daily chart exactly a year ago. It could be on its way to complete a Saucer Top cycle which started back in July 2012. Its neckline set at the 95 level.

 

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Looking at the longer time frame of EUR/JPY, we can see that this naughty pair has a habit of bouncing up and down between the average range of 109 and 137.

EURJPY Opens Below Ichimoku - Long Term Time Frame EURJPY Opens Below Ichimoku - Long Term Time Frame

Now this was the ultra long term outlook. How can we apply it to our trading strategy on a shorter term time frame?

Zooming in a little bit, you'll realize that not only the pair opened below the Ichimoku cloud on Monday, but it also could be on its way of forming an angled double top pattern, which is yet another bearish signal. Before completing that however, it needs to break below the symmetrical triangle it is currently dancing within.

EURJPY Opens Below Ichimoku - Short Term Time Frame EURJPY Opens Below Ichimoku - Short Term Time Frame

 

Our supporting pivot level is set at 113. Bearish targets are set at 111 and 109 in extension.

Next we need to know what is coming up from a fundamental point of view before we can develop our trading strategies.

 

EURJPY Opens Below Ichimoku - Fundamental Analysis

We ended off Friday with a surprising amount of volatility in the EUR and GBP crosses. The EU-27 leaders summit was to blame for this, where the European union’s future and Brexit negotiations were discussed. The official view was that the EU would not allow the UK or any other withdrawing country  to "cherry pick" from the privileges of the union. The speculation that the United Kingdom was already preparing to withdrawal from the EU perhaps shook the market the most, weighing heavily on GBP and EUR. The US Dollar, in turn, drew the greatest benefit.

Coming up...

Monday: During the London session today we have  Euro-Zone Current Account  at 8 AM GMT and later Bank of England Bond-Buying Operation Results. During the New York session the NAHB Housing Market Index will be out at 2 PM GMT.

 

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BoJ Monetary Policy Statement & Rate Decision on Wednesday: On Wednesday's Asian session, all eyes will turn to the Land of  the Rising Sun.

Bank of Japan (BoJ) is currently deep in an aggressive easing campaign and is quickly losing its credibility. There is seemingly no scenario where the policy authority can rescue the strengthening Japanese Yen. This could position the market for a critical evaluation. In which case it can return Mr. Yen crosses to yet another uptrend. That means further down-moves for the EUR/JPY pair.

 

EURJPY Opens Below Ichimoku - Trading Strategy

Step one: Calculate your  risk tolerance.

Step two: Pick a scenario that best matches your risk tolerance.

Bearish Scenario

For now, targeting 113.

A break below the triangle will be our second bearish signal, with first target set at 111.

Have more risk tolerance? Target 109.

Bullish Scenario

We could see a temporary correction within the next few days. However a long-term rebound seems quite unlikely at the moment. We need:

  1. A break above Ichimoku
  2. A confirmation above Ichimoku
  3. Investor-friendly outcome from BoJ monetary policy meeting
  4. Great news for the EU

In which case, you can target 117.75 and 122.10 based on your.... Guess what? RISK TOLERANCE!!

Here are Invest Diva's calculations for important EUR/JPY approximate levels to keep an eye on:

Support Levels Turning Point Resistance Levels
109 113 117.75
111 114.50 122.10

 

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Kiana 喜愛成
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