EURJPY Staircase on Weekly Charts

This week’s candle for the Euro-Yen has pierced the steeper down-trend line and is trading above the 25% retracement where it encounters a strong resistance area which had been repeatedly holding as support from October 2008 to February 2009, finally pierced in last May and subsequently broken to the downside.

According to the Trendline Staircase Strategy, we could expect the currency pair to push forward to the 38.2% Fibonacci retracement and maybe even a little further to psychological level 120, which coincides with last February level of support (119.90).

However, before a further push up, we will have to wait for a retracement and retest of the trend-line break to see if this pattern is confirmed. We can appreciate that on 4-hour charts EURJPY is very likely to get back to the strong support level at around 113.85 and then take its impulse back towards 118.20/120 as expected with this strategy.

A first entry at this level (after confirming that the support is holding), with stops just below 113.00 and targeting 118.00 would yield an approximative 1:4 risk-to-reward ratio on a longer term approach.