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EURJPY Range Trading Strategy – Thin Flat Ichimoku Cloud


Nov.16.2016

EURJPY Range Trading Strategy - Thin Flat Ichimoku Cloud

With Euro and Japanese Yen both under pressure, a EURJPY range trading strategy seems like the way to go. Especially with the ever thinning, flat Ichimoku cloud forming on the daily chart. Read on for a IDDA approach to forex strategy development.

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Technical Analysis | EURJPY Range Trading Strategy

Daily Chart: The EURJPY pair confirmed above a very thin Ichimoku cloud on the daily chart last week. That immediately opened doors for further gains. But how many pips are we talking?

After reaching a 4-year low back in June on Brexit results, EUR/JPY has been forming higher lows while being capped by the 23% Fibonacci retracement level at 117.75.

This certainly shows that the battle for "who's the weaker currency on the floor" is on. So far, Mr. Japanese Yen seems to be the winner of the weakness as it has slowly but surely pushed the pair up.

EURJPY Range Trading Strategy - Daily Chart Analysis EURJPY Range Trading Strategy - Daily Chart Analysis

With this, reaching at least 117.75 in medium term seems likely. A break above this resistance level could open doors for further gains towards 38% Fibonacci at 122.10.

 

 

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114.50 along side with the thin Ichimoku cloud are acting as the key pivot. Support is the upward trendline crossing 113.

 

Monthly Chart:  The EURJPY pair continues below the Ichimoku cloud on the monthly chart with resistance set at the 23% Fibonacci level at 117.75. Support level is set at June lows at 109. We continue to maintain a range-trading approach for long term EUR/JPY traders  as the lower band of the monthly Ichimoku cloud acts as a strong resistance.

EURJPY Range Trading Strategy - Monthly Chart Analysis EURJPY Range Trading Strategy - Monthly Chart Analysis

On the other hand, the pair has yet to complete the saucer top cycle which started back in 2012, so any acceleration in EUR weakness could help with a break below the current supports and pushing the pair towards 100 on a long term basis.

 

Fundamentals | EURJPY Range Trading Strategy

While Mr. Japanese Yen is enduring some weakness on US election results, Ms. Euro is facing problems of her own.

Forget about Brexit, which could very well impact the Euro. Italy is set to hold a key referendum on the 4th of December, which may lead to an “Italeave."

While the prospect of an “Italeave” isn’t that high as of yet, the prospect of political instability in Italy will be enough to create yet another a sell-off of Ms. Euro on the forex dance floor. Ms. Euro has already lost pips against its major counterparts on the idea.

With the results of Brexit, US elections and the Chicago Cubs winning the major league world series after 108 years, "impossible" seems to be the new possible. So you might want to buckle up for more surprising news that could shake the forex dance floor to its core.

 

 

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More on the Economic Calendar...

Thursday: UK Retail Sales (MoM) (OCT) will be out at 9:30 AM GMT followed by Euro-Zone Consumer Price Index  (OCT) at 10 AM.  We are expecting high volatility in the USD crosses during the New York session as the US releases their CPI and Unemployment Claims at 1:30 PM GMT.

Friday: Day Trading opportunity could be found in the CAD crosses today later during the New York session but before that, ECB's Draghi Speaks at Euro Finance Week in Frankfurt at 8 AM GMT followed by Fed's Bullard, SNB's Maechler who will also speak in a Panel in Frankfurt at 10:30 AM.

Depending on their tone, the market participants may change the current sentiment in the EUR/USD and of course, EUR/JPY.

 

Canada’s Consumer Price Index (OCT) will not be out until 1:30 PM and it is estimated to have ticked up from last month’s reading. This is the key gauge for inflation in Canada, reflecting a decline in the purchasing power of the Canadian Dollar. An increase in the index indicates that it takes more Dollars to purchase this same set of basic consumer items. A rising CPI may prompt BOC to raise interest rates in order to manage inflation and slow economic growth.

Market Sentiment | EURJPY Range Trading Strategy

According to one of the largest forex brokers in the US,  37% of traders are bullish on EUR/JPY. Long positions are 18.6% lower than yesterday and 1.4% above levels seen last week. We use this as a contrarian indicator to price action, and the fact that the majority of traders are short gives signal that the EURJPY may continue higher. The trading crowd has grown further net-short from yesterday and last week. The combination of current sentiment and recent changes gives a further bullish trading bias.

Trading Strategy | EURJPY Range Trading Strategy

Putting the technical, fundamental and sentimental points of the IDDA approach together, short-term bullish strategy seems to have a reasonable risk-reward ratio, followed by more range trading opportunity between the key support and resistance levels.

Bullish Scenario:

Depending on your risk tolerance, you could consider targeting 122.10 ONLY if the pair confirms a break above the range and reisstance level of 117.50

Bearish Scenario:

Failure to break above 117.50 would give bears a medium-term chance with targets set at 114.50, 113 and following key support levels.

Stay tuned for market updates and signals on our premium closed Facebook page. As always, when in doubt, book a private session with me to get your portfolio on track.

 

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

Support Levels Turning Point Resistance Levels
109 113 117.50
111 114.50 122.10

 

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Kiana 喜愛成
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