Euro bounces against Yen

Kate Leaman Kate Leaman

17 June 2019

Euro forex trading

The Euro rallied against the Japanese yen to kick off the week on Monday, breaking back towards the ¥122 level. However, there are a lot of things to pay attention to on this chart, as we see a lot of trouble at the very levels that we are dancing around right now.

Fibonacci levels

There are several Fibonacci levels to pay attention to on the chart, and we have recently broke below the crucial 61.8% Fibonacci retracement level which of course is considered to be the “golden ratio”, a place where a lot of attention will be paid to. At this point, the market has rallied back above there, but then fell right back through it. This tells us that there is a lot of bearish pressure, and typically when you see the 61.8% Fibonacci retracement level broken down through, it’s not uncommon at all to see the market wipe out the entire move and go back to the 100% Fibonacci retracement level which is currently closer to the ¥118.50 level.

eur/jpy chart

EUR/JPY

Moving averages

just above the recent high, which also coincides with the 50% Fibonacci retracement level, we have the 50 day EMA pictured in red. At this point, both the 50 day EMA and the 200 day EMA are sloping lower, showing signs of negativity and weakness in general. Because of this, longer-term traders are starting to pay attention to the negativity and continue to press the downside.

Levels to watch

As with any market, there will be several levels to watch. At this point, the ¥122 level will attract attention, but more than that the 50 day EMA is also something to pay attention to which is closer to the ¥123 level. Underneath, the ¥120 level will be thought of as support, and as a result it’s very likely that if we break down below there at the time we will then see a significant acceleration to the downside. Because of this, rallies that show exhaustion will probably attract a lot of attention, especially considering that there are so many negatives out there that could continue to send the currency markets into a “risk off” scenario.

The trading strategy

The trading strategy is relatively simple at this point, as we are most certainly in a major downtrend. Any time we rally and show signs of exhaustion it’s going to be an invitation to start selling. However, if we were to get a daily close above the 50 day EMA, then one would have to think that the overall attitude is starting to change. That of course would change the trading strategy quite significantly, and it would then become a situation where we need to pay attention to the next couple of days, but at this point there’s no reason to think that we are going to break out quite yet. Ultimately, this is a market that has been in a downtrend for some time, and although we have seen a major bounce in the past, it looks as if we are chipping away at the bullish attitude.


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