The Japanese yen pairs were one of the strongest currency pairs part of the FX dashboard in 2021. The EUR/JPY, in particular, traded with a bid tone, rising above 130 and stretching all the way up to 134.
A bid behind the euro was partially to blame. The improved vaccination campaigns in Europe led to a sharp improvement in sentiment, and the euro was boosted across the board. The Japanese yen traded with a weak tone since 2021 started, further contributed to the EUR/JPY rise.
But at current levels, caution is needed. The 130 area was tested on the first attempt to the downside but the bounces that followed were not strong enough to break the series of lower highs. Hence, a bearish trend might have already started.
Two levels loom large for the EUR/JPY on its way to the downside – the 131 and the 130 levels. A break there should trigger more weakness.
A triangle as a reversal pattern suggests that the pair may have ended a complex correction while above 130. If that is the case, bears may want to wait for the price to close on a daily basis below 131 before going short with a stop at the end of the e-wave and a take-profit level set by using a risk-reward ratio of 1:2.
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