The EURJPY was unable to maintain its upward momentum with a failed breakout above its resistance area which is visible in light grey in the above H1 chart. A H1 candlestick formed an inverted hammer which resulted in a sharp drop in this currency pair. The upper band of the Bollinger Band initially dipped, but then reversed one final time and creating a double top in the process; form this level the upper band followed the sell-off and now all three bands are sloping lower in accordance with price action.
Forex traders may now opt to realize floating trading profits and exit their short positions as the EURJPY has approached its support area which is visible in light blue in the above chart. Selling pressure started to show signs of reduction and the EURJPY may enter a sideways trend inside of its support area until a catalyst for the next move will arise. The current low is a higher low as compared to its previous sell-off which results in another bullish trading signal from a technical aspect.
Forex traders are recommended to seek out long positions at 133.650 and below in order to be prepared for the the expected short-covering rally. More conservative traders may want to wait for a sideways trend to form or for the EURJPY to form a double bottom. A take profit target of 135.950 is recommended for a potential trading profit of 230 pips on the H1 Chart. A breakout above the support area is expected to initiate the short-covering rally.
Forex traders should protect this trade with a stop loss level at 132.850 for a potential trading loss of 80 pips which will result in a Risk-Reward (RR) ratio of 2.88.
Long @ 133.650
TP @ 135.950
SL @ 132.850