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.

Trade #: 2502EURJPY-1 Trade #: 2502EURJPY-2

Both trades cancelled due to a large gap during Market opening.

Trade Set ups - Feb 25th

Weekly trade set ups for the week starting Feb 25th, 2012

Trade #: 2502AUDNZD
AUDNZD - 30 M, LONG

Entry: 1.23047
Exit: 1.23645 (598)
S/L: 1.22875 (77)
Time: 25th Feb 11:30

Notes: We see a perfect Wolfe Wave being formed, along with the contrary wave formation. However, price within the contrary wave hasn't yet been reached. Once this is confirmed, taking up entry at 1.23047 is ideal. Watch for any breach of the TL 1, 3, 5 from the main Wolfe Wave. Wait for reversal and then go long. Over all, i'm quite convinced on this trade set up.

Trade #: 2502AUDUSD
AUDUSD - 15 M, LONG

Entry: 1.03033
Exit: 1.04131 (1098)
S/L: 1.02738 (1393)
Time: 25th Feb 12:00

Notes: The AUDUSD 15 minute chart shows an incomplete Wolfe Wave, especially in the inner contrary wave. We expect price to fall to the main TL 1, 3, 5 at 1.03032. A possible piercing of the main TL 1, 3, 5 should be expected before price reverses.

Trade #: 2502EURJPY-1
EURJPY- 30 M, SHORT

EURJPY - SHORT
Entry: 123.338
Exit: 122.943
S/L: 123.591
Time: 25th Feb 03:30

Notes: There are two potential trades to be taken from the EURJPY chart. The first trade will be a short, as pivot 5 hasn't been formed yet. However, TL 1,3 shows the expected price when Pivot 5 is formed. Therefore, we go short at 122.945 and set our stop on the EPA line which is 123.444. We'll set our take profit at 123.44. This is better depicted in the next chart below.

Trade #: 2502EURJPY-2
EURJPY- 30 M, LONG

Entry: 122.528
Exit: 123.849
S/L: 122.209
Time: 25th Feb 08:30

Notes: This trade is still premature and built upon speculated price points. Therefore, trading this blindly could lead to a losing trade. On the otherhand, there is a possibility to book profits both on a bearish and a bullish bias.

On the longer term Wolfe Wave, we expect price to fall to the TL 1, 3 (5 hasn't been formed yet). Pivot 5 will be formed when the contrary wave is completed (and this will be our first trade, mentioned above).

Once pivot 5 is established, wait for price reversal to go long.

Footnotes
Because this is my very first analysis of Wolfe Waves, I will keep it simple, restricting my analysis to the 3 pairs, 4 trades. I will revisit these trades at or around the ETA for the trades to see how good or bad we have done.