EUR/JPY - Looking Bearish but Trapped in Consolidation

By: Doug Rosen

This pair does continue to look just as bearish as ever, but after this pairs recent drop down it has been trapped in a 100 pip consolidation range. The top of this range is about 105.66 and the bottom is about 104.62 so plenty of pips to be had in between until this consolidation is broken and I do expect that when it breaks it will be to the down side.



Looking at the Weekly chart price is slightly below the lower Bollinger Band and the 5 ema is at 107.50 but sharply falling downward. The Weekly Stochastics is in the oversold zone as well. This doesn't change my bearish bias but tells me that price may want to go up just a bit before it continues its way downward. On the Daily chart the Stochastics is still in the oversold zone but the daily 5 ema has touched price and is still pointing downward. Looking at the 4 Hour chart the 21 ema has caught up with price and appears to be pushing it downward. The 4 hour stochastic is also at the high side of the trade zone and looks like it wants to make a cross down. The 1 hour chart doesnt tell me much. The ema's are all braided together and the Bollinger Bands are a narrow tunnel but that is ok because compression will build up in this tunnel and soon force price outward. We call that the Bollinger Squeeze.



On the 15 minute chart it is almost the same as the 1 hour. So if I was to enter any positions with this pair I would stick to range trading and wait for price to reach the top of the range around 105.60 to enter a short or wait for it to fall down to 104.50 region to look for a long. Shorts from the top of the range are the best bet for this pair since if it were to break this range it would most likely break to the downside.