Shorting the Retrace in EUR/JPY
EUR/JPY has been on a downtrend all week but it has retraced higher now, which looks like a good opportunity to sell this pair
EUR/JPY turned bearish at the middle of last week and the bearish momentum picked up pace this week after Trump’s threat to increase tariffs on China. The JPY benefits when markets are uncertain as a safe haven asset and this pair opened with a bearish gap lower on Monday.
The bearish momentum has continued all this week as traders remain sidelined ahead of the US-China meeting and this pair has lost around 200 pips from the closing price last week to the bottom today. The last meaningful bearish move took place early this morning and EUR/JPY dived around 70 pips.
But it has been retracing higher and the retrace is almost complete now as stochastic indicator is nearly overbought. Besides, the price is finding resistance at the 20 SMA (grey) while the 50 SMA (yellow) stands ready to kill any jump if the 20 SMA lets go. The previous H1 candlestick also closed as an upside-down pin which is a reversing signal, so we decided to open a sell signal here and go with the flow.
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