- EUR/JPY has offered a day-trading opportunity with a 1:3 risk to reward ratio in a high probability setup.
- However, it should be noted that while the strategy is high probability, we have the European Central Bank today.
Given how shallow the retracement of the impulse has been, so far, coupled with the presumed lack of volatility in Asia ahead of the meeting, this setup is higher risk and should be treated as so.
However, the environment is bullish and the price has offered an entry at old resistance turned support, so according to the rules, it can be taken at market with a stop below the structure as illustrated here on both the 15-min and hourly charts below:
On the hourly chart, it shows a strong rally and subsequent decelerating correction deep enough to entice the bulls back into play.
However, as explained, the setup is slightly higher risk pertaining to the ECB meeting later today.
We should expect lower volatility in Asia.
There could still be some more downside in the correction ahead of the meeting.
The stop loss is placed a little deeper to cater for what could be a drawn-out period of drawdown towards a 50% mean reversion of the hourly impulse from 124.72.
As soon as there is a new support structure formed on the 15-min charts, the stop-loss can be moved to breakeven for a risk-free 3R trade.
Updates to follow….