EURJPY - A Cautious Approach

The EURJPY Daily and H4 charts shows two Wolfe Wave Patterns, and both contradictory to each other. While the H4 Wolfe Wave pattern shows an upward bullish bias, the Daily chart shows a bearish bias.

The extremities in price shows a possible rally to the 126 price region on the four hour chart while the Daily chart shows a target price around the 98 price region.

So how do we trade such kind of a set up?

The first place to look for is to understand what the Schaff Trend Cycle is telling us.

EURJPY - H4 Chart Shows a Bull Run

On the H4 chart we see a bullish bias formed on the Schaff Trend while the Daily chart shows a bearish bias. One way to interpret this is to assume that price would rally a bit more before turning bearish. From the H4 chart, we see that after price dropped to the 38.2% Fibonacci level, price managed to rally all the way to the 61.8% region. Given that both Wolfe Waves and Schaff Trend analysis are inconclusive, we will have to look to the Fibonacci levels to give a sense of direction.

EURJPY Daily Chart shows a bearish formation

One would assume that price is currently retracing and we can expect to see a bearish rally that could possibly breach the 38.2% level and head to the 23.6% region of 116.883.

From a fundamental perspective, the week ahead is packed with economic events for both the EUR and JPY currencies, starting Monday when we will see economic data from Europe, starting with the Spanish unemployment report along with Thursday when we will have the BoJ's monetary policy statement.

A risky trade would be to wait until H4 Schaff Trend shows a bearish biash and the Daily chart is still bearish. However, this trade would have to be taken with caution because we have the 120.622 as a strong level of support, hinting at a ranging price.

Taking all the above into consideration, it would be sensible to stay off this pair for the moment until a proper direction is formed.