Oct 5th EUR/JPY
EUR/JPY – Oct 5th
1) Retrace Fibs Plot (blue) = High of Oct 4th 115.29 to Oct 4th 09:45 low 113.75.
The Japanese interest rate cut, which had no firm release time, was absorbed by the market around 04:40 GMT. We can see spike on all Yen pairs and other majors. Spike bounced off the 78.6% retrace fib and retreated to the 50% end Asian session.
Pair waded through data and chopped around until U.S. data at 14:00. Pair revisited high of plot, probing about 5 pips above, and bounced.
2) Retrace plot (black) for bounce:
Low = 12:00 114.68
High = 18:00 115.34
23.6 = 115.18
38.2 = 115.09
50 = 115.01 (hit)
61.8 = 114.93
Pair retraced just beyond the 50% fib and just now bounced off the wider 78.6% from #1 plot listed above.
The set-up and recognition was easy. Target with highest probability, in our opinion, was the 38.2% retrace fib of 115.09. Stop-loss just above 115.29, with max = 10 pips.
Risk/reward = 10/17
The consideration of most concern was USD/JPY, which at the time (18:00) had made its way back down to 83.20, dangerously close to previous post-intervention level of 83.15.
However, note that USD/JPY made a new post-intervention level of 82.95 during end of euro session at 14:45. This fact was enough for some to trade this bounce.
We'll save additional comments on the Yen intervention for our review of USD/JPY.