Deriving Euro Yen Technical Objective Using the BOJ

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EURJPY Technical Analysis

The Euro was heavily sold in the Forex market in today’s session following remarks from the European Central Bank (ECB) by Nowotny that the ECB missed its inflation targets and more structural tools are required, hinting a possible QE expansion by the ECB. These re marks were made in an effort to contain EUR gains in the market as part of the global currency wars. As we have repeated on numerous occasions neither the Fed or the ECB will take any steps ahead of the Spanish elections in December.

We have also mentioned that the Bank of Japan (BOJ) may expand its QE by the end of October 2014 by up to JPY 10 trillion. That makes EURJPY as a candidate for a long trade although we believe the Euro is more than likely to recover against a basket of currencies aside the Japanese yen. At the time of this writing we are focusing solely on Euro yen and may increase our exposure to the Euro around the daily close.

EURJPY Daily Chart

Please click on the chart to enlarge:

EURJPY Daily Chart 15/10/15

EURJPY Daily Chart 15/10/15

The 200 Daily Moving Average (DMA, in blue) is seen as the key support in EURJPY daily chart. As we know what triggered the selling in Euro yen we are quite comfortable using the MA as the nearest support. We also note the latter support level (in green) may contain any efforts to drag EURJPY lower should the price attempt to break below the 200MA. The target is fairly conservative as if the BOJ will indeed expand the QE stronger gains may be seen but for the moment we are relaying on corrective gains in EUR pairs and crosses and the possible pricing-in of the market ahead of the BOJ monetary policy meeting. We are using a fairly tight stop and a decent risk reward ratio for the long trade.

As we chose not to wait for the daily close please note the price may re-test the 200MA before retracing higher. We are willing to absorb the limited drawdown should it indeed materialize.

EURJPY Trade Alert Details

EURJPY long at market price (134.91)
Take profit: 138.15
Protective stop: 133.53
Risk Ratio (RR): 1 : 2.5 (approx.)
Estimated duration: 14 days

16/10/15 UPDATE: EURJPY is trading at  135.73 at the time of this writing.

Please click on the chart to enlarge:

EURJPY Daily Chart 16/10/15

EURJPY Daily Chart 16/10/15

We are closing 20% of the long trade at market price and shift the protective stop to the entry. EURJPY has encountered a minor intraday resistance.

19/10/15 UPDATE: EURJPY is posting a higher low, which suggests corrective gains are due despite the fact it is trading within a near proximity to the protective stop. It appears at the time of this writing the ECB monetary policy meeting on Thursday is they key event for our EUR trades.

20/10/15 UPDATE: We are pleased with the progress of our open trades. EURJPY is trading at 136.04 at the time of this writing.

Please click on the chart to enlarge:

EURJPY Daily Chart 20/10/15

EURJPY Daily Chart 20/10/15

We are closing 20% of the long trade at market price and shift the protective stop to 135.30.

20/10/15 UPDATE II: We are shifting EURJPY protective stop to 135.44.

21/10/15 UPDATE: EURJPY is trading at 135.96 at the time of this writing. We are not shifting the protective stop from its current levels but close 10% of the long trade at market price ahead of the ECB monetary policy meeting tomorrow

22/10/15 UPDATE: EURJPY triggered the protective stop order ahead of the US unemployment claims and the ECB press conference. We have ended the trade with a decent profit.

22/10/15 UPDATE II: Following Mario Draghi remarks we suspect the threats of a lower deposit rate and exercising structural tools were aimed to weaken the Euro in the Forex market as we believe the ECB will not act before the Spanish elections in December.

EURJPY Daily Chart

Please click on the chart to enlarge:

EURJPY Daily Chart 22/10/15

EURJPY Daily Chart 22/10/15

EURJPY reached multiple support levels on the daily chart, concreted by the 200MA in pink. Under regular circumstances this would require an additional confirmation but as we know what lead to the EUR selling in the market and expectations of a QE expansion by the BOJ we are comfortable with the current entry.

The risk we are taking is choosing not to wait for the daily close as we find the current levels rather attractive for establishing a long trade.

EURJPY Trade Alert Details

EURJPY long at market price (134.55)
Take profit: 137.60
Protective stop: 133.59
Risk Ratio RR): 1 : 3.3 (approx.)
Estimated duration: 14 days

22/10/15 UPDATE III: We are increasing our exposure to the Euro. EURUSD is providing us with a daily entry as the 100MA (in grey) is being re-tested. Similar to EURJPY, we are expecting EURUSD to recovery from today’s weakness following the ECB press conference.

Please note we are opting for a tighter stop as opposed to what the chart is demanding as we are heavily relying on the 100MA. Current levels are also attractive, which is why we choose not to wait for the daily close despite the risk.

EURUSD Daily Chart

Please click on the chart to enlarge:

EURUSD Daily Chart 22/10/15

EURUSD Daily Chart 22/10/15

EURUSD Trade Alert Details

EURUSD long at market price (1.1160)
Take profit: 1.1400
Protective stop: 1.1096
Risk Ratio RR): 1 : 4.4 (approx.)
Estimated duration: 14 days

23/10/15 UPDATE: Our attempt to enter before the daily close in EURUSD and EURJPY resulted in the market triggered the stops for both trades. We were aware of the risk but decided to opt for it, which in this case did not bear any fruit.

Deriving Euro Yen Technical Objective Using the BOJ

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Deriving Euro Yen Technical Objective Using the BOJ

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Deriving Euro Yen Technical Objective Using the BOJ

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Deriving Euro Yen Technical Objective Using the BOJ

Last Updated on October 23, 2015