Do you trade breakout patterns?
Then you will want to watch this video.
We highlight a potential accumulation breakout pattern forming on #EURJPY.
Watch the video learn more…
Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, Head Currency Analyst.
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In this video, we’re going to look at EUR/JPY as we could see a little bit of a build-up in contracts.
What I’m talking about is: if we bring in the strength and weakness chart, why are we looking at EUR/JPY in the first place? EUR hasn’t been doing much lately and could be considered a currency that is neither weak nor strong. It’s holding its own at the moment, just standing the same position. Nothing is happening with that currency.
We can look at the individual currencies against it. At the moment, the JP Yen is quite interesting because it is in a reversal position and we can see that it’s at minus six and could potentially reverse. It was getting weaker. What I would particularly look for this week was a minus-six to gaining minus four.
But looking at EUR/JPY, the price is pulling back, into the weekly point of the control area. I noticed that the price was coming back, and we’re forming this consolidation, through here. When the price does this, it means that the institutions are battling to build orders and the importance of these areas is the breakout. If we were to get a breakout to the upside, then we would likely see a retest of this structure for then a rally higher. If we get a breakout to the downside, we’d like to see a retest of structure and then a break to the downside. I’m favouring the break to the downside in this situation because the price is now trending down.
We looked at buying EUR/JPY last week: it rallied up and ended up taking profits in and around this rotation, here, because again, when the price consolidates in these patterns, the market will typically look for areas within this to get short to the downside, depending on the trend and the market came down. Unfortunately, it rallied up, but it didn’t quite get to the full targets – which were sitting above these highs – but ended up rallying it back into this area and cutting the trade at that point. Still, the market then fell further and came back down. Now, it’s in this rotation, here, or this range, here, and in ranges, the market is setting up for a breakout. It’s either going to break to the downside as I said or to the upside. Either way, we should be looking.
The only reason I say it could break downside is that we have a point of control down here, at 126.26. Now, we know that this is the most traded level of last week. Again, it’s where the institutions have been doing business in the market. What are they likely to do? Well, sometimes they’re likely to come and test that point, and because the price is trending down towards this area, I’m expecting the price to hit this 126.26 area. What will it do after that? We have to wait. Will it reject it? Bounce and break then retest it? That’s another situation to look out for.
At the moment, the JP Yen is starting to produce a tiny bit of strength.
We have to keep an eye on the stock markets as well, but what I’m going to be keeping an eye on EUR/JPY is the breakout to the upside of this tight trading range that we’re in. Look for a retest for longs, breakout to the downside, and look for the market to head towards this 126.26 level.
Thanks for watching. I’ll speak to you soon.
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