One forex market setting up nicely right now is the yen’s value to the euro (EUR/JPY).
In contrast to euro/dollar (EUR/USD), which has been trending sideways since September 2012, and a tricky near-term trend in dollar/yen (USD/JPY), EUR/JPY has been trending sharply higher since July 2012.
As you can see on the chart on the left, price has respected Fibonacci resistance at 132.037 yen – a 50% retracement of the downtrend from August 2008 to July 2012.
BULLISH BREAKOUT AHEAD?
But a consolidation since April suggests a lot of supply has been absorbed and this could ultimately result in EUR/JPY taking out that ceiling and running higher.
RSI averages show momentum is strengthening on both the monthly and the daily chart. More formidable resistance is the 61.8% retracement level at 140.988. This lines up with the highs in 2003 and 2004. With a stop loss placed beneath the floor of the recent congestion at 124.949, reward potential is far greater than risk.
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