EURJPY—rally

I'm out of the remainder of my long from 109.85 at 110.30 yesterday (+45 pips) when it looked as though the pair might fail at resistance. It hasn't gotten above 111.16 but this rise technically invalidated the daily evening star since that high was 110.99.

The C leg of the ABC targeted 111.09 (1.618A) so we're right in the vicinity of that and we're also at confluence.

Two things jump out at me on the hourly chart. First, the pair has been in a sideways consolidation since 8AM EST yesterday morning. It's a fairly narrow rectangle of 97 pips (111.16/110.19) and when prices hover in a narrow band such as this just above or below resistance it's often a bullish sign because demand (buying) is enough to prevent a retracement. If it does break upward, the target is 112.13.

The other thing that jumps out is the look of a triangle forming which in Eliott Wave speak would break upwards. In classical technical analysis the triangle is often a continuation move. The top of the triangle is 111.24 from which it could break upward to target 112.54. This is close to resistance consisting of price highs, fibs, and the 200 MA at 112.43. Beyond that, within the upward sloping channel, there are targets of 113.04 and 113.78.

On the downside the support remains at 109.85, 109.58, 1.0895 (prior resistance), 108.50 and 108.00. Below that is a zone of support from 107.86 down to 106.83, then 106.24 and 105.83.

I'll post a chart later.

© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.