EUR/JPY Price Analysis: Bulls set for a 1:3 R/R day trade, target 125.70s
|Developing Story
- EUR/JPY has offered a day-trading opportunity with a 1:3 risk to reward ratio in a high probability setup.
- However, it should be noted that while the strategy is high probability, we have the European Central Bank today.
Given how shallow the retracement of the impulse has been, so far, coupled with the presumed lack of volatility in Asia ahead of the meeting, this setup is higher risk and should be treated as so.
However, the environment is bullish and the price has offered an entry at old resistance turned support, so according to the rules, it can be taken at market with a stop below the structure as illustrated here on both the 15-min and hourly charts below:
15-min chart
1-hour chart
On the hourly chart, it shows a strong rally and subsequent decelerating correction deep enough to entice the bulls back into play.
However, as explained, the setup is slightly higher risk pertaining to the ECB meeting later today.
We should expect lower volatility in Asia.
There could still be some more downside in the correction ahead of the meeting.
The stop loss is placed a little deeper to cater for what could be a drawn-out period of drawdown towards a 50% mean reversion of the hourly impulse from 124.72.
As soon as there is a new support structure formed on the 15-min charts, the stop-loss can be moved to breakeven for a risk-free 3R trade.
Update: Breakeven achieved
The price has, as expected, moved higher with the Tokyo fix and open setting off some volatility to help the trade move to a breakeven scenario which is the first objective.
the stop loss can be moved to the entry and the new highs should offer a support structure on a subsequent correction and bearish price action.
The price action can be seen clearly here:
Update: Support structure being tested
So far so good, although the support structure was a lot deeper than anticipated and we now want to see a strong retracement and higher close to form a higher support structure.
Nevertheless, this trade is risk-free.
Update: Has the market formed new structure?
This is what we wanted to see.
Update: Stop almost triggered
The support structure is broken and the stop is almost filled for breakeven.
Update: Breakeven
The price action was consolidative into the ECB, as expected, and was always a higher risk setup.
The strategy caters for breakeven and losing trades.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.