Trade Example – EUR/JPY

Filed under: Learn Forex Trading |

I have a trade example for you on the EUR/JPY pair today. This, for those of you that don’t know, is the exchange rate between the euro and the Japanese yen.

 

Figure 1.

To begin with, take a look at Figure 1. This is the daily chart for the EUR/JPY pair. What you can see here is that the pair is in a downtrend, and it has been for some time. The 8-day exponential moving average is crossed below the 21-day exponential moving average, and it has been for a while now. However, we should be a little cautious because the moving averages are moving closer together.

 

Price had also been approaching a significant area of support/resistance in the market, so I had been on the lookout for any bearish price action signals on the intraday 1-hour and 4-hour charts.

 

Figure 2.

If you now look at Figure 2, you will see the 1-hour chart for the same EUR/JPY pair. What you can see here is that the market formed a very nice double top, showing that this particular level of support/resistance was holding. Price formed an inside bar, followed by a bearish engulfing pattern (which I have highlighted). This would have been a good place to go short, at the break of the low of the engulfing bar, with a stop loss placed just a few pips above the high of the mother candle of the inside bar, and a target of at least two times our risk. As you can see, this trade would have been successful for a nice, quick, rise on our bank. This is yet another example of a high probability price action setup, and it gives us an edge in the market that in the long run, should ensure that we are profitable. That’s it for today, and I’ll be back with more forex price action trading examples soon…

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