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Mid-term trading idea FX EUR/JPY - bull speculation: euro to strengthen inside the 1-1 channel

Trading opportunities on the currency pair: Prime Minister Shinzo Abe’s comfortable election victory in Japan has increased expectations that the central bank’s current monetary policy will remain in place. Both currencies are under pressure, so the pair is trading sideways. In my forecast, I’m expecting a breakout of the 134.50 resistance with a subsequent growth to 141.06 (high from June 2015) inside the 1-1 channel. The intermediate targets are 136 and 139. This scenario will not happen if the weekly candlestick closes below 129.50.


The last idea on the EUR/JPY currency pair was published on the 27th of March, 2017. At press time, the price was trading around the 119.66 mark. After a price rebound from the trend line, a bullish engulfing candlestick pattern, and a reversal on the stochastic indicator, I was expecting the euro to rise to 124.00 with an intermediate target at 122.55. This failed to happen after the daily candlestick closed lower than 118.50. Coming under pressure, the euro dropped to 114.84, which marked the beginning of a 1956-pip rally in mid-April.

Current situation

After the price exited the 2-2 channel, the euro’s surge gathered pace. The euro rose on expectations that the ECB’s QE program would be reduced. The pair has been trading flat for the last few weeks. The Catalonian crisis is weighing negatively on the euro, as is the ECB’s decision to extend the QE program by 9 months.

Japanese Prime Minister Shinzo Abe’s convincing election victory has increased expectations that the Bank of Japan’s current monetary policy is set to remain in place. Haruhiko Huroda’s term as governor of the Bank of Japan will come to an end in April next year. He is currently the frontrunner for the position and may well be reappointed to head the bank for another 5 years.

Both currencies are under pressure. Due to this, the price has stabilised at around 132.61. My forecast is predicting further growth to 141.06 (high from June 2015). Given that the AO indicator (3rd window on the chart) is slightly overloaded, the flat will most likely continue until the end of November. The quicker the price returns to 134.50, the higher the likelihood of reaching 139 (162% of the downwards movement from 124.09 to 114.85). This growth won’t happen if the weekly candlestick closes below 129.50.

Fig 1. Weekly chart. Source: TradingView

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