The Japanese Yen didn't have a very good day on Tuesday. Along with many other counterparts, we saw a massive EURJPY bullish engulfing which pushed the pair above the daily Ichimoku cloud. Here is your IDDA to develop a trading strategy for this naughty forex pair.
1- Fundamental Points
Well of course the French elections had a lot to do with the Euro to jump high. But EUR/JPY in particular jumped even higher.
On Japan's side, we didn't really have much economic data to shake the Japanese Yen to this extent. So what gives?
You guessed it. The market sentiment. Unlike other types of securities such as stocks, the forex market is more heavily driven by the crowd psychology than economic events. Which brings us to the second point of IDDA and that EURJPY bullish engulfing.
2- Technical Points: EURJPY Bullish Engulfing
Tuesday's EURJPY bullish engulfing was followed by a confirmation of a break above the daily Ichimoku cloud on Wednesday's Sydney session. The Tenkan is just about to cross above the Kijun line at the time of writing. However there remains yet another main resistance level the pair must overcome before we can shout-out a bullish reversal. That is the 38% Fibonacci level at 122.33.
EURJPY Bullish Engulfing - Daily Chart Technical Analysis
The final straw for investors with low risk tolerance, will be the Chikou-Span-Ichimoku-cloud cross over.
The next bullish targets are set at Fibonacci retracement levels at 125.70 and 129.37 respectively.
3- Market Sentiment
According to the SSI, 45.3% of traders were net-long EURJPY on Tuesday. The number of traders net-short is 0.3% lower than yesterday and 48.7% higher from last week.
We typically take a contrarian view to crowd sentiment. Positioning in EUR/JPY was less net-short than Monday, but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURJPY trading bias.
EURJPY Bullish Engulfing Strategy
As 4th point of the IDDA, you must calculate your risk tolerance before deciding on which trading strategy is suitable for your portfolio. Join us for a free MasterClass to learn more.
Disclaimer: Forex is one of the HIGHEST risk investing instruments there is. If you don't have sufficient risk tolerance to trade forex, you can try investing other online securities.
With regards to EURJPY bullish engulfing and other developments, here are Invest Diva's calculations for important approximate levels to keep an eye on:
| Support Levels | Turning Point | Resistance Levels |
| 110.89 | 118.07 | 125.70 |
| 114.99 | 122.33 | 129.37 |
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