The EURJPY has traded higher from its lows and formed a rising wedge formation as visible in this H4 chart. The move has been quite powerful and we believe this pair will rest and contract down to its rising 50 DMA before future upside may be possible. A minor correction from here would be healthy and ensure further upside.
MACD has supported the rally and remained in bullish territory, but it started to show weakness during the most recent spike higher. It has formed a negative divergence and suggests that the trend will reverse temporarily. RSI has reached extreme overbought territory and formed a negative divergence as well. A breakdown into overbought territory will accelerate the sell-off.
We recommend taking a short position at 123.60 with a potential second entry at 125.00. Should this pair breach the 124.10 to the upside we recommend traders to hedge their position with a long hedge before adding new short positions to this trade.
Traders who wish to exit this trade at a loss are advised to place their stop loss level at 124.10. We do not utilize stop loss levels and will execute this trade as recommended. Place your take profit level at 121.60.
