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EUR/JPY price analysis: AB=CD formation complete

EUR/JPY price analysis: With the daily AB=CD formation complete, there is ample scope for a more aggressive correction to the upside.

Market highlights from the past week

Friday, May 1: In its latest bulletin, the ECB reiterated that eurozone GDP could decline as much 15 per cent for the second quarter with a protracted and incomplete recovery thereafter.

Monday, May 4: Risk appetite remained fragile on Monday, but US equities moved higher in late trading to post net gains with sentiment making net gains in Asia on Tuesday.

Tuesday, May 5: The German Constitutional Court ruled that the Bundesbank would need to stop its QE bond buying unless the ECB provided justification for the scheme.

Wednesday, May 6: The final eurozone PMI services sector index recorded a marginal improvement to 12.0 from the flash reading of 11.7, but it was confirmed at a new record low (from the 26.4 previously registered in March).

EUR/JPY price analysis

Let us have a look at the technical viewpoint.

Monthly: We have seen four months of net losses. Further selling pressure has been posted in May. Previous swing low from April 2017 is seen at 114.85. The 78.6 per cent pullback level from the 109.20-137.50 move is seen at 115.26.

Weekly: A full AB=CD formation would take the pair to 108.63.

Daily: An AB=CD corrective formation has been completed at 114.40. Previous support at 115.45 now becomes resistance. We are seeing a correction lower overnight.

Intraday four-hour: This looks to have completed a bullish Elliott wave count (five waves) that would indicate that the next move to the downside is corrective. Support is seen at 114.63.

Outlook: With the daily AB=CD formation complete, there is ample scope for a more aggressive correction to the upside. Resistance is seen at 116.10. Buying a dip at 114.63, with a stop below the previous low, offers a favourable reward against risk setup today.

Possible trade setup

Action: Buying at 114.63

Stop: 114.30

Target: 116.10

Potential return on risk to first target: R4.4 (reward 147 / risk 33)

Euro / Japanese Yen
Daily change
117.293
Low: 117.126
High: 117.931

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