The daily chart of EUR/JPY shows that the recent weakness that was triggered the bearish ABCD pattern on March 7th is tentatively finding support from the psychological 1.40 level and the 50- and 100-day Simple Moving Averages (SMA). This morning, the euro benefited from a solid beat on French Manufacturing PMI, but those gains were quickly erased after Germany’s reading missed its forecast and had its lowest reading since November.
The bears are almost back in control of this pair and if risk-off in equities continues to hit Europe they could see a massive selloff that may target the 136.00 area. Price is tentatively breaking down below the key uptrend line from February 4th. The key range for EUR/JPY this year is 130 – 145 and it is likely we will see a key consolidation up until the summertime. If price is able to recapture 143.00, the bears will be squeezed out, but we do not anticipate fresh 2014 highs.
The trade: Sell EUR/JPY 140.90 with a stop loss at 141.90 and a take profit at 137.90. The Risk/Reward Ratio is 1:3.
Edward J. Moya
WorldWideMarkets Online Trading