We warned yesterday about the confluence of events and technicals underway in EUR/JPY and said a big move was likely today. The direction wasn’t entirely clear because there was a possibility of a false breakout but we said the bias was to the upside.
We wish we would have ignored the possibility of a false breakout and went long because there was a huge move to the upside today in EUR/JPY. The combination of an inverse head-and-shoulders pattern and the end of the month/quarter/Japanase fiscal year generated a big move in the pair.
Here is the chart. Note how today’s move was the biggest in more than a month.
The good news is, as our strategy pointed out yesterday, that this is just the beginning of a bigger move. The head-and-shoulders pattern is now confirmed. The measured target is 130.77.
We think there might be some pain, in terms of a pullback, but we also can’t rule out a continued rally. We are going long here and are going to look for ways to add to our position. We will be adding all the way down to 125, if necessary.