Early in Asia, the Japanese yen traded modestly firmer against all of its major European trading partners. Commodity currencies continue to shine with both the Aussie dollar and kiwi gaining over half a percentage point against the yen.
Yesterday, President Trump cautioned about a too strong USD and withdrew a threat to declare China a currency manipulator. Japan Chief Cabinet Secretary Suga also reiterated financial stability is important and that the government will pay close attention to market moves.
Price action on the EUR/JPY shows the bearish move accelerated once price closed below the 200-day SMA, which currently trades at the 117.86 level. If we continue to see yen strength, price may target the psychological 115.00 handle. It is around that area that price could form a bullish Gartley pattern. Point D is targeted with both the 78.6% Fibonaccia retracement level of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move. If valid, we could see price rally towards 117.00 region.
If the pattern is invalidated, we could see further downward pressure target the 112.50 level.
The trade: Buy EUR/JPY 115.25 with a stop loss at 114.75 and a take profit at 116.75. The Risk/Reward Ratio is 1:3