Forex Overnight Preview: Trading plan For EUR/JPY
Shain Vernier • 2 min read
Today’s U.S. forex session has been relatively uneventful. Small recoveries in the EUR/USD and AUD/USD, as well as a rebound for the yen, have marked the most notable action. However, there are several events that will occur during the U.S. overnight session that have the potential to bolster participation.
The JPY and Euro will both be in focus in the next 24 hours. Statements from the Bank of Japan (BOJ) and reports out of the Eurozone headline an exceptionally active U.S. overnight session:
Bank of Japan Interest Rate Decision
Eurozone Consumer Price Index
Eurozone Gross Domestic Product
The interest rate decision from the BOJ will be the first post-snap election monetary policy release. Analysts are on the fence for this one, but conventional wisdom calls for preservation of the negative prime rate to preserve inflation.
The Eurostat releases are poised to bring volatility to the Euro, as inflation and production come into focus.
Technical Outlook For the EUR/JPY
With so many fundamental market drivers being released in a condensed timeframe, expect heavy participation and short-term volatility. With a bit of luck, the price action will bring several macro support levels into play.
EUR/JPY, Weekly Chart
The opportunity to engage support levels from the weekly chart is an infrequent occurrence. The last time that price for the EUR/JPY approached the SMA or Bollinger MP was back in April of this year. In the event that the fundamentals line up, price action may give us a shot to trade them before week’s end.
Here are the macro support levels:
Support(1): 20 Week EMA, 129.91
Support(2): Bollinger MP, 129.41
Support(3): Weekly SMA, 128.54
Trading Plan: I am a big fan of trading macro support and resistance levels. In this case, the economic reports may bring them into play. Going long from each support level gives us a solid entry to get in on the yearly bullish trend.
Below are the options:
Execute a 1:1 R/R scalping methodology from each support level. Initial stop loss of 25 pips, shaded entry +5 pips.
Take a position from each support level. Initial stop loss of 50 pips, looking for a 1:1 or 1:2 R/R payoff.
A premium long intermediate-term position trade is present from the Weekly SMA, 128.54. An R/R of 3:1 with an initial stop loss below 128.00 yields over a 150 pip return.
These trades remain valid until week’s end. Currently, the EUR/JPY is trading around 131.50. In the event that we see a dramatic price move, these entries will provide high probability trades with the macro trend.
As always, trade smart and watch the risk management!