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EUR/JPY at the Crossroad Between a Possible ABC Correction and Bullish Continuation

The EUR/JPY has been consolidating in a sideways range. After briefly breaking below the range support, it rebounded sharply. This basically resulted in a suspect bearish breakout that might be a false breakout. A false breakout to the downside would suggest an eventual break to the upside. But as price retreats, we have to also juggle with an ABC correction scenario.

EUR/JPY 4H Chart 1/23


(click to enlarge)

The Bullish Continuation Scenario:
- A false bearish breakout followed by a bullish continuation is a possible scenario especially if price can hold above the 121.65 pivot.
- The RSI should also hold above 40 now that it tagged 70. 
- The next near-term target would be 123, above which the 124-124.10 high would likely be tested. 
- Since the prevailing trend entering the December-January consolidation was bullish, we can anticipate further upside. 
- 125 is viable, but we should probably cap at 126 because it is a key support/resistance pivot level. (See Daily Chart Below)

ABC Scenario:
- Looking at the 4H chart, we can see that bulls haven't made it clear that they are in control of the market.
- In fact there could be further bearish correction in the form of an ABC pattern for example. 
- In this scenario, we would still be bullish on EUR/JPY in the medium-term and over the next couple of month's horizon.
- But in the short-term, we would anticipate further consolidation, with downside towards the 119.50 area.
- Because of the prevailing uptrend, we might not want to project the bearish correction past the 118.55 pivot. 

Limbo:
- I think if price can hold above 122 this week, the bulls have a good chance of pushing EUR/JPY higher.
- However, between the 121 and 121.70 area, either the bullish continuation scenario or the ABC correction scenario looks viable. 
- A break below 121 would likely be part of further correction, even if its not a perfect ABC structure. 

EUR/JPY Daily Chart 1/23


(click to enlarge)