After months of consolidating inside a symmetrical triangle pattern on its 4-hour time frame, EUR/JPY finally picked a direction when the ECB hinted that it could ease in June. The pair fell below the triangle support and is indicating that further losses could be in the cards.
However, stochastic has already reached the oversold region, which means that the pair could be due for a quick bounce before heading lower. A retracement to the triangle support could take place before the downtrend resumes. The chart pattern is roughly 800 pips in height, which means that the resulting selloff could be of the same size.
Shorting at market or at the pullback to the broken triangle support are possible entry options. Having a wide stop is reasonable since this could be a long-term trade and the profit target is huge.
By Kate Curtis from Trader’s Way