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Today’s Trading Edge: EUR/JPY on a Path for Further Gains?

Posted by Edward Moya on Jan 9, 2014 7:14:00 AM


Today, the disinflationary trend in Europe will be addressed by ECB President Mario Draghi. Declining prices, a slow economy and poor borrowing may lead to a wait and see approach regarding another round of stimulus.   

Earlier this morning, the euro did not have much of a reaction to a solid release on German Industrial Production this morning.  Output in November climbed 1.9%, better than the forecast of 1.5% and a significant improvement to the prior reading of -1.2%.  This reading may help elevate forecasts for German growth for the last quarter of 2013. 

Volatility should pick up over the next couple hours and we may see a full percentage point move or greater this morning with the euro crosses.  The ECB press conference may provide some knee-jerk reactions, but at the end of the day, we may see Draghi maintain a slightly less dovish stance.  The recent improvement in data may allow him to become a little more upbeat and if that is stance in the Q/A part of the day, the euro may skyrocket above recent highs across the board.     

Price action on the 60-minute chart shown above highlights the potential formation of a bearish ABCD Gartley pattern at 143.75.  On the monthly, weekly, and daily charts, price is trading above the 200-, 100-, and 50-day Simple Moving Averages.  A possible momentum setup will look to enter a long position at the 108.9% Fibonacci expansion level of yesterday’s high to low move.  If in the middle of his conference he becomes slightly more dovish and price respects the 144.00 level, a major reversal may occur.    

After the dust settles over the next couple of trading days, traders may eventually a resumption of the longer term bullish trend and the potential Gartley pattern may be invalidated. 

The trade: Buy EUR/JPY 143.25 with a stop loss at 143.00 and a take profit at 143.75.  The Risk/Reward Ratio is 1:2. 

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading


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