EUR/JPY candlestick analysis for February 4, 2011

On a 4-hour graph the EUR/JPY currency pair is probably forming a Falling Three Methods candlestick combination. As is known, this model is a signal for further downside movement.

Falling Three Methods is formed after the pair could not break the resistance level near 114.00 and fell sharply to 111.00, which implies dominance of the bears on the market.
Besides, the currency pair is probably forming a reversal pattern Head and Shoulders. At the moment the price is testing the Fibonacci level 38.2; break of this level will support this viewpoint and cause a decline targeted at the support level 109.56, where Fibonacci correction level 61.8 is also located.
It is not recommended to open short positions until Falling Three Methods pattern is fully formed. However, stop orders should be placed slightly above the resistance level 112.91 as its break will result in upside movement targeted at 114.00.

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