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EUR/JPY: Long, or Short?

Last updated 2/4/2009 5:29 PM EST (GMT -5) 0 Comments - Add your comment

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FX360 Technical Analyst Staff

Technical Analyst, GFT

The EUR/JPY presents two equally attractive opportunities---a potential sell on a rally to key resistance near 118.80, or a potential buy on a drop to support near 111.80.

With current prices hovering around 115.00, a move to either level may sound a bit distant. However, the EUR/JPY is one of the more volatile major currency crosses so we may see either of these levels hit within the next 24 hours.

So which level will it be? Will the EUR/JPY rally, or fade? Simple answer....it doesn't matter...

If prices do in fact rally to key Fibonacci resistance near 118.80, there is potential for a high probability opportunity to short on an AB=CD sell pattern completeing at 78.6% of the swing down from X (199.56) to A (113.13). This gives us a bearish Gartley pattern with sell entry at 117.97, stop-loss at 119.77, and profit targets at 116.78 (T1...38.2% of CD) followed by 115.84 (T2...61.8% of CD).

Should the EUR/JPY decide to continue its bearish decent, then a high probability buy opportunity exsists at the convergence of Fibonacci extension levels near 110.80 in the form of a bullish butterfly pattern. Should this occur, buy entry at 110.81, stop-loss at 108.72, and profit targets at 112.87 (T1...38.2% of CD) followed by 114.37 (T2...61.8% of CD).

As always, watch out for gaps and/or wide-ranging bars within either CD leg as prices approach projected entry levels. These are typically warning signs of strength and oftentimes lead to pattern failure. Profit targets may need to be adjusted based on where point D actually occurs, so we'll will keep you posted on these potential patterns as they develop...

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