By: Mike Kulej
Over last couple of days the EUR/JPY has been trying to find direction. On a short-term chart, hourly, this pair made new a high for the upswing, at 112.66 and started to drift sideways, with a down side bias. The price made a minor low at 111.12, which is important because that is lower than a prior low at 111.31, suggesting a possible trend change.
Drawing few lines, reveals a little more about what is happening here. The EUR/JPY is in a process of building a head shoulder reversal pattern, which is of a complex variety. Two separate H&S patterns could be identified here, but the larger is always of more importance and dominates the landscape. For this reversal to be successful, this pair must break through the latest support at 111.12. This would confirm that the trend has indeed changed into bearish, and could take the EUR/JPY to 110.00 or even to 109.00 during this particular price swing.
A line can be drawn through latest high points, creating a very well defined bearish trendline. It could be used for additional short entries or as a stop loss level for a bearish trade. One of these lines, the support or the trendline will be broken soon, indicating the direction of the next move for the EUR/JPY.