The pair EURJPY from the beginning of March to mid-April, that is almost 7 weeks moved in a strong upward trend. The main factor influencing the pair was the yen losing heavily to the dollar.
However, the last weeks indicate a change of mood and the pair is in the correction of previous increases. MACD on the weekly chart points south.
Could the Head and Shoulders formation be a prelude to deeper declines?
On the H4 chart below, we see a head-and-shoulders formation
The price is already below the neckline and approaches it from below in the form of an upward channel, or in this case a bearish flag as seen on the H1 chart.
Why bearish ? Because the price often breaks downwards from such a formation, signalling declines. The bottom breakout from the flag may end the current short-term correction and the price will return to the declines.
If the range of declines were to be the size of the H&S formation then the price could fall around 500p. However, there are several demand zones on the way which will stand in the way to reach the target. The first such zone is at the level of 133.50. One should also take into account the possibility of an upward breakout from the flag, which in my opinion is less likely, but then the downward scenario will be negated.
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The above analysis is based on the PA+MACD strategy, a detailed description of which you can read HERE . I will talk more about the PA+MACD strategy applied to these currency pairs during the live trading sessions which you can attend from Monday to Friday.
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