EUR/JPY pre-interest rate news analysis
EURJPY This chart seems congested however I added comments and titled mporant key factors for this analysis. Earlier in the week I published a trade idea on this pair of which 1 trade won and another did not win. Fortunately I was able to cut my losses on the 1 trade and secure profits on the other trade. I have been keeping my eyes out on this pair for sometime and decided to wait until the end of this week to place a trade. Though the week is not done until tomorrow end of market close, this is my analysis coming into next week prior to the Monday 01/22 Bank of Japan interest rate news
Technical factor 1: 4H time-frame
Trading on larger timeframes gives you a stonger idea on how the long-term forecast looks for a particular instrument. In this case, we can clearly see other strong indicator set-ups that gives you a better entry in the shorter timeframes like the H1 or 15M charts.
Technical factor 2: Fibonacci retracements
From the peak of the last bullish rally to the bottom of the last market short-sell, we can clearly identify key levels that this pair seems to hit. You notice from the bottom of the Fibs (0% level) it spikes up to the 38.2% zone before coming back down. This it spikes to the 50% zone before coming back down to the 38.2% zone. Then we see it jump from 38.2% to 61.8%. Then from 61.8% back down to 50%. From 50% it strongly surpassed the 61.8% breaking that roof and now approaching the 78.6% retracement where it is quickly approaching. I believe that tomorrow (Friday 01/19/24) it will trend at this zone until the market closes.
Technical factor 3: Triangle pattern
The purple zone marked A,B,C,D mark a tecnical trend simply called a triange. We can see that the trend of EUR/USD starts to form a triangle in this A,B,C,D range. This often marks the end of a consolidation zone and the sign of a breakout about to happen. Which direction? Well that is dependant once the a breakout indicator happens which has not happened yet. You see the predicated breakout arrows I drew which shows a possible breakout scenario for both a buy or sell.
Fundamental Factor 1: News
Countries on a monthly basis release interest rates that affect the market with strong buys or strong sells in many cases. This news can play a key factor because interest rates are one of the determinants on the strength of a particular currency and affects the overall economic wellbeing of the country. A higher than expected rate is positive/bullish for the JPY, while a lower than expected rate is negative/bearish for the JPY.
Confluence: Wrapping It All Together
We can clearly see that the Triangle and the fibonacci's are working together. the triangle patterns respect the fibonacci retracement zones. This is more possibly on larger timeframes because we can look at the market as timeframe snapshot. The end of the triangle also approaches the 78.6% retracement zone where strong activity normally happens. The key to which direction can be significantly affected when the news comes out on monday for BoJ interest rates. If it is strong news for the JPY, then I predict it will follow the red arrow as a breakout pattern. If it is poor news for the JPY, then I predict it will follow the blue arrow as a breakout pattern. Notice how both of the breakout patterns approaches another fibonacci key level.
This is a prediction as to what the EUR/JPY will look like for next week using these factors. Let me know what you guys think of my analysis!
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