Short covering or Relief from risk aversion?.

A renewed risk aversion is triggering the current round of euro-selling. The shake in risk appetite seems to hint at resurfacing concern about the durability of the global recovery. The euro remained under pressure amid mounting concerns over Greece's sovereign debt and worries of a spill over into other countries such as Portugal, Spain and Italy.

EURJPY has been on the downward spiral to a low of 124.60 at 0:40 GMT. Then it ticked higher that appear to be a bout of general short covering. It met with a resistance at 125.64 and reversed direction downward within a descending channel.

At point A, with the of the lower channel line and 61.8% retracement, EURJPY has reached turning point for an upside move. Both lags are at bottom with BB Macd tugging the zero line. (refer to the 5 MTF.

Made my entry on the 1 MTF chart.. Entry for a buy at 7:02 with the lag crossing over the 15 level. Target is at B (5 MTF) or 1 (1 MTF) where there is a horizontal resistance of the opening price.

Make a sell entry at 7:21 after the inverted hammer (on 5 MTF) and bearish engulfing candles (on 1 MTF) with the approaching the 85 level. Exit at C point with a hammer candle on 5 MTF and 1 MTF. Make a reverse entry for a buy as EURJPY has break out from the channel and completed a retest of the upper line of the channel. First target price at D, resistance of last high and the second target at E- resistance at round number (126.00).

Obama first State of Union Address

US President Obama’s first State of Union Address ignited the Asian bourses but pushed the JPY lower in morning Asian session.

EURJPY opened at 126.20 before being stopped by the Pivot resistance R1 at 126.71. A head and shoulder pattern was formed to reverse the morning bullish tone. A break of the neckline was followed by a retest at point 1 (refer to 5 MTF chart).

On the 1 MTF, the retest was at point A. Then a harami candle occurred with a blue lag moving to cross the 85 level and BB Macd bounced off the zero line. A sell entry was initiated with a target of 126.2. At point B, EURJPY get support of the horizontal support 126.25 and the ascending diagonal support line. There was a divergence of BB Macd and price with blue lag crossing over the 15 level. An exit and reversed with a buy entry was made at 7:52. Target at 126.70 i.e. the last swing high and Pivot resistance R1.

China action weakened EURJPY during the Asian session

In the early morning Asian session saw risk on in the form of EUR/JPY breaking through some recent highs on its way to a high of 128.34. This was on the back of some optimistic comments from the US President and the prospect of Bernanke being re-appointed. One hour later with reports that China was again taking measures to reign in excessive lending and slowly pop the growing property bubble; this saw EUR/JPY plunge 126.20 in double quick time.

The fall was within the descending channel A-A1 and B-B1( refer to the second chart of 5MTF). Along the way a flag pattern was identified.

After lunch, EURJPY was consolidating with both lags glued to the bottom and BB Macd moving within the two narrow channels. At this time a possibility of triangle pattern forming.

About 20 minutes to 7:00(6:00 GMT) I referred my decision on the 1 MTF char (the first chart above).. At 6:50 entered with a buy on blue lag approaching the 15 level. Since EURJPY is at consolidation phase I am looking for a less 20 pips profit. Exited at point 1 when 60 EMA acted as a resistance. for a 10 pips profit. At point 1, decided to fade the round number of 126.50 with a sell entry. The fade was taken on the position of the blue lag is at the top waiting to cross over the 85 level.

Exited the position at Point 2 with support at mid level of Pivot point (the blue dotted line) and the fibo extension of 127.0%.

At 7:51 on blue lag moving passed the 15 level and approaching the diagonal resistance line, made a buy entry. EURJPY then sprang up like a spring after 2 hours of consolidating.

Obama's Bank Proposal helped the Yen

JPY showed it might during the New York session on the 21^st January, in the aftermath of President Obama’s controversial plan to limit the size of US largest banks and what trading activities they could engage in.

EURJPY fall from 129.20 to 127.50 by the close on 21^st January. The fall continued in the first hour of 22^nd January to touch 126.30 before Tokyo open and then rebounded to 127.50.

EURJPY formed a pennant with the upper diagonal resistance line (A-A1) which was able to be penetrated in the afternoon session in Tokyo.

On 5MTF chart (the first chart above), there is an indication for buy entry at point 1 with blue lag moving above 15. At point 2, Blue lag crossed over the 85 from above which indicated a sell position but the red lag has not yet reached the 85 level. This clearly indicated that price will able to penetrate the diagonal resistance line A-A1. At point 3, the blue lag started to reverse its direction and moved toward 85. This occurred during my trading session.

On 1 MTF, at point A which is also at point 3 on the 5MTF, the blue lag is approaching the 15 level from below which triggers my buy entry. At point B, the blue lag has moved into 85 territory but the red lag has reversed its downward move to the upside. With BB Macd with a green dot moving passed the upper channel (blue line) which indicate a bullish move. The moving averages also confirm the bullish tone.

EURJPY subsequent uptrend move was quite impressive that within 30 minutes it gain 60 pips.

Confusing chart patterns

On 20th January, prior to my favorite trading session, 2 chart patterns can be identified but both of them does not shown a true textbook moves.(refer to the 5 MTF above). Earlier, a descending triangle was detected with a lower horizontal support line and upper diagonal resistance line. A breakout occurred at 6:05 (5:05 GMT) can be interpreted as a breakout from the triangle with a textbook move for a retracement to the horizontal support line and then a continuation of the downtrend. Instead of moving down, the retracement moved passed the diagonal resistance line.

At this stage, I could say that there is failure of the ascending triangle pattern and a possibility of a falling wedge pattern.

A falling wedge or declining wedge, is a formation which has a strong bullish bias. They can be trend continuation pattern, if preceded by an uptrend or can be trend reversal pattern, if preceded by a downtrend.

In this case, it should be a trend reversal as EURJPY has been on the downtrend. With price had already penetrate the upper resistance line, EURJPY is expected to retrace the w edge before continuation of upward moves. It touched the 60 EMA and reversed to retraced to the wedge. It touched the diagonal resistance line, but instead of rebounding upward, EURJPY moved lower bypassing the lower support line of the wedge. Therefore indicating a wedge pattern failure.

Looking a the Prices moved with a lower high and lower low, with 60 EMA acted as resistance level and prices is well below the 200 EMA, we could see that the trend is still downward.

The downtrend is within the descending channel (the two descending orange lines). Anyway my trade is a scalp trade. With the confusion of identifying the patterns, I still managedto earned my 50 pips target trading from 6:00GMT to 9:00 GMT. I will showed the trade in the next session.

Trading EURJPY at Asian and European overlapping session

The Asian session which open in Tokyo at 24:00 GMT normally start with a flurry of early activity as dealers move rapidly to process their backlog of outstanding orders during the late New York session. This first couple of hours of activity after Tokyo open usually feature most of the fireworks in this session. The lack of market depth during Asian session means that more often than not, traders testing the limits of any previous range (possibly recording marginal highs/lows), only to fall back and consolidate the move after lunch period since volatility-hating central banks and exporters love to turn this session into the day's consolidation session. The hour before Frankfurt open, the consolidation pattern normally will be broken.

At 7:00 GMT Frankfurt session open, the European traders especially the EUR cross traders have the tendency to reverse the direction that broke from the consolidation. London which opens at 8:00 GMT has always been the market trend-setter. Although the initial moves may not begin in London, this is where the large players operate and get a chance to swing their big sticks. Moves initiated and extended in London should be taken seriously since it is the only money center with deep enough pockets to overcome any "artificial" interference such as central bank interest. Thus we typically see London picking a direction and sticking with it until New York enters the fray.

I base my scalp trade on the above time and price pattern. Trading EURJPY between 5:00-9:00 GMT period, I managed to incorporate the time and price pattern that made my trading easier and convenient. Between 5:00-6:00 GMT (after lunch in Tokyo) EURJPY is at the last stage of consolidation. Normally the period between 6:00 – 7:00 GMT the consolidation pattern will be broken then at European opening hour , EURJPY will reverse the trend of the broken consolidation pattern. One hour later i.e. at London open, London traders will try to impose some trends. Normally a reversal of the first hour European ‘s trend..

To illustrate such pattern, let us take a look at my analysis of EURJPY on Tuesday, Wednesday, Thursday and Friday.

Tuesday: January 12

EURJPY formed a pennant and a breakout occurred at 6:00 GMT. Prices moved upward and touched the daily pivot and subsequently retreat to the pennant . I was expecting EURJPY to bounce back and break the pivot point for the upside. Instead, EURJPY gaining strength it become weaker after Frankfurt opened and found support at S1. At London open, traders made an effort to reverse the downward trend but overall weakness in EUR overwhelm the attempt.

Wednesday: January 13
The ascending channel that began in early morning Asian session was part of the bigger triangle formation. A breakout of the triangle upper line at 6:30 GMT moved price to a resistance below 132.50. A double top was formed at first hour European session that was found support at Asian session opening price or at the apex of the triangle. An expected reversal occurred at 5 minutes after London open that pushed EURJPY to test the 132.50 level.

Thursday: January 14
A broadening top was formed since Tokyo noon (3:00 GMT). At the third touch of the upper resistance line of the broadening top that occurred at 5 minutes before 6 GMT a divergence of price and MACD occurred. A double top head shoulder pattern (clearly shown on 1 MTF chart) and 1-2-3 pattern were formed. The second top was the second break of 133.50 that failed.

On the way down, EURJPY get a support of 60 EMA. A bullish 1-2-3 pattern with BB MACD moving passed zero level and the blue lag crossed 15 confirmed a reversal at 8:00 (7:00 GMT). Target is at previous high. A shooting star ended the uptrend with a break of 133.50 level that failed.

Friday: January 15

EURJPY fall sharply in the early hours of Asian session. Then price consolidate to form a pennant. A penetration at 7:25 (6:25 GMT) pointed a continuation of downtrend. At first hour of European session a consolidation occurred again forming a reverse flag just above the 133.00 level indication a continuation of price downtrend.

The yen demonstrated strength

On Tuesday, in early Asian session JPY crosses fall heavily and then recovered one hour later. EURJPY penetrated the Tokyo opening price at 133.62 and fall to 133.00 areas before rebounded to the opening price. Then it went fluctuating just below the opening price. Initially forming an ascending triangle with an upside breakaway. The breakaway was stopped at Pivot Point with prices returning back into the triangle that made the breakout as false move. The false break created an ascending channel with the top most resistance point occurred at about 55 minutes before Europe open. A break of the lower support line of the channel pulls EURJPY all the way down.

The target will be at S1(133.22), the last support level at 133.00 and the finally at S2(132.85)

The first break of 134.00 is false

In the morning Asian session yesterday, EURJPY progressed upward from 133.50 to just below the 134.00 level. It forms a horizontal channel that was falsely broken down during the hour before Europe open. At that stage, prices form a spinning top candles indicating a tussle between sellers and buyers.

A high close doji at European open push prices to the upper line of the channel and again a false break occurred at the top channel and at the 134.00 level. A low close doji reverse the up moved that end with a doji again. A high doji bumped up the price on the upside and a genuine penetration of 134.00 occurred at 9:20 (8:20 GMT). EURJPY subsequently shot up .

EURJPY ranging 127.00 to 138.50 in 2010

The low in early Asian session formed a horizontal channel. A break over the upper boundary of the channel propel EURJPY to test the 133.50 level. Price fade out from that level forming a bearish head and shoulder pattern.

EURJPY reached the Head and shoulders price target and a flat bottom indicated a reversal is imminent.

Enter my first entry with a 123 formation at 7:08(6:08 GMT). Price is expected to break the 133.50 level and tested the opening price. Exited at European open.

Enter my second entry on the short side with yet again 123 formation. Looking for a 20 pips profit. Get the profit target and exited 7:48 GMT.

There is an old saying in the stock market that the first 5 days of trading in January sets the tone for the rest of the year.

If we refer to EURJPY, in the first day of the year i.e January 4^th, EURJPY touched above 133.50 before free falling after opening session in New York. The fall bring EURJPY below 133.50 in early Asian session on the 6^th January. EURJPY recovered to test the January 4^th high. It break that resistance level and touched 134.00 in late New York session on January 7^th.

The USDJPY also moved in similar fashion as EURJPY for the first week of the year.

According to Kathy Lien, Director of Currency Research, GFT The seasonality bias in USD/JPY is not as strong as USD/CHF but it is still quite clear that the dollar tends to rise in the month January against the Japanese Yen. Although this trend has been in place for 6 out of the past 10 years, it is also important to note that this pattern has worn off lately with USD/JPY falling 3 out of the last 4 years.

So, where do you go from here..it is hard to tell. Maybe the EURJPY will moved between a range of 127.00 to 138.50 similar to last year movement since the middle of March.

Braodening top and the resignation of Japanese finance Minister

A broadening top shapes like a megaphone and it is hard for a trader to spot the pattern because it is seen far less frequently than others. It could be referred to as inverted pattern, as they are formations which start with narrow fluctuations, and then widen with diverging resistance and support lines.

The classic technical analysis text by Edwards and Magee characterizes a broadening top as a market that lacks intelligent sponsorship. It is one in which the public is being whipped around and driven this way and that by rumors. Because it is so unpredictable, the broadening top pattern is extremely difficult to trade. There is no clear breakout to either the upside or downside edge of the pattern.

The Yen softened against the EUR and USD during Tokyo morning session. EURJPY went upward from 131.5 to 132.00 during the first two hours of Tokyo session. Just before lunch time in Tokyo there was the news concerning the speculative resignation of Japanese Finance Minister Fujuii. Price formed the classical broadening pattern after lunch in Tokyo.

My first entry was at the breakout of the resistance line of the broadening pattern and the 132.00 level. Target will be at around 131.50 area. Exit my entry at congestion of prices that formed a descending wedge. My second entry was on the breakout and retest of the resistance line of the descending wedge. Target at 132.00 area.

EURJPY move within the 132.50 to 133.00 area

Yen cross was heavily sold throughout the Asian session. There was USDJPY and EURJPY selling into the fix which continued throughout Asian morning session. The EURUSD was also flat as market was into the Yen crosses.

Two hours after Tokyo open, EURJPY drift under the 133.00 level and then went below yesterday low and 132.50.The major support level at 132.10 area managed to contain any further drop.

After lunch during Asian session, EURJPY shot upward within a step channel to test 132.50.

My first entry was for long at 6:07 (5.07 GMT) on a 123 pattern. Get my target at 132.50-132.60 area.

After testing the 132.50 support price, an ascending triangle with horizontal resistance at 132.68 was formed. A breakout of the resistance and a retest of that level confirmed an upside breakout of the triangle. Thi will be by second buy entry. Target for 20 pips moves.

EURJPY yo-yo in the first trading day of 2010

In early Asian session, EURURJPY plunged from the 133.50 level and went all the way to the 132.50. It found support at 61.8% retracement of the previous swing high and low with a bullish harami on the 5 MTF chart indicating a reversal. An 1-2-3 pattern confirmed the reversal at 6.15 (5:15 GMT) and the breakout of the upper resistance line of the reclining channel. The profit target is at 133.00 level and second target at 133.50.

For the day, EURJPY managed to recover from early morning loss during the asian session at about 15 minutes prior to New York open.

EURJPY at the highest since December 7

On the 30^th December, EURJPY has penetrated 132.00 and threatening to breach 133.00 for a resistance level of 133.55.

The last day of 2009, EURJPY showed a tremendous moved upward from Asian opening up to New York closing.

Early bullish contention was indicated after two hours of Tokyo open, when prices touched the previous day high. Then price form an inclining wedge indicating a minor reversal that was captured by the 50% retracement of swing low in late New York session to the previous swing high in early Asian session. A piercing candle was also formed at the 50% retracement level.

My entry was a that time for long with first target at previous high/resistance of 132.83 and next target at 133.00.

Price after reaching the first target at 6:40 GMT (20 minutes before European open) started to register a high volatility. A pennant with horizontal resistant and diagonal support was formed in the next 30 minutes about 5 pips below the 133.0 level.

A penetration of the above horizontal resistance, EURJPY managed to move through the 133 and ended around 133.10. I fade the move for a reversal and at London open I exited from the market.

For the last day of 2009, EURJPY managed to reach the 133.50 level. The last week of the year, EURJPY has moved from 131.50 on Monday and closed on the 31^st December at 133.50 level.