Hi Traders! EURJPY forecast update and follow up is here. On October 27th I shared this EURJPY Forecast And Technical Analysis post in my blog. In this post, let’s do a recap of this setup and see how it has developed now. If you would like to learn more about the way we trade and the technical analysis we use then check out the Traders Academy Club. Spoiler alert – free memberships are available!
My Idea
On the H4 chart, the price which was moving lower has created a bearish trend pattern in the form of three lower highs, lower lows. Generally, after a bearish trend pattern, we may expect corrections and then further continuation lower. Currently, it looks like the correction that we are looking for has happened. The price which was moving higher has reached a key resistance zone formed by the 50%(124.727) – 61.8%(125.279) fibonacci retracement zones of the bearish trend pattern, respected it, and is currently moving lower. And, based on the Parabolic Sar the dots are above the price, we may consider this as evidence of bearish pressure. In addition to this, the ADX indicator gave a bearish signal here as well at the cross of -DI (red line) versus +DI (green line), and the main signal line (silver line) reads value over 25, we may consider this as yet another evidence of bearish pressure. So until this key resistance zone shown in the screenshot below (marked in red) holds my view remains bearish here and I expect the price to continue lower further.
EURJPY H4(4 Hours) Chart Current Scenario
Based on the above – mentioned analysis my view was bearish here and I was expecting the price to continue lower further. The price action followed my analysis exactly as I expected it to and moved lower further delivering around 160 pips move so far.
The market provided us with various facts here supporting this bearish view. On the H1 chart the price which is moving lower has created a bearish trend pattern and then we had a pullback in the form of first leg to the upside followed by a correction and we were expecting the price to provide one more leg to the upside to complete the ABCD pattern. But the price didn’t move higher as we expected, alternatively it respected the most recent downtrend line, moved lower and created a bearish trend pattern which we may consider as evidence of momentum change. Generally after a bearish trend pattern we may expect corrections and then further continuation lower. The correction that we were looking for happened in the form of double wave to the upside and then the price broke below the most recent uptrend line. The price then moved lower further and provided a fantastic move to the downside.
You can see this clearly on the M30 chart below:
Currently, on the daily chart, we have a potential bullish divergence that is forming at the moment, this is something that we need to pay attention to. So if you are still involved in the sells then this is a good place to consider managing your trade and secure your profits (cash out or partial cash out or trailing protections or partial hedge, etc.. depending on the strategy that you work with).
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As traders we always have two choices, the first one is to fall in love with our analysis and try to convince the market and expect the price to move in the direction as per our wish. The second one is to follow the facts that the market provides us and make the right actions according to that. As you know the first option won’t help us and as you can see in the example above what happened when we followed the facts that the market hinted us and took the right action according to that.
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To your success,
Vladimir Ribakov
Certified Financial Technician
