EUR/JPY Rising Wedge Signals Possible Reversal

Summary:

EUR/JPY forms a rising wedge pattern while above the 130 level and now the price tests the upper trendline. Bears prepare to go short.

The euro started the trading month on a strong note, and the EUR/JPY pair reflects it perfectly. The pair declined in the last trading day of April, only to reverse the weakness today and to pressure the highs again.

However, bulls should be aware of a massive rising wedge forming on the EUR/JPY cross pair. The price is now piercing the upper trendline of a rising wedge pattern, as it typically does before reversing.

The euro benefited from strong manufacturing data released today. The Final Manufacturing PMI came out at 62.9, well above the 50 level that marks the contraction and expansion levels. Also, the German Retail Sales for the month of April came out much better than expected, at 7.7% on 2.9% expected and 1.2% previously. As such, it is no surprise that the euro trades with a bid tone so far in the trading day, as the positive data puts pressure on bears.

EUR/JPY Technical Analysis

Both conservative and aggressive bears have a possibility to trade the EUR/JPY to the downside. Aggressive bears may want to short at market, place a stop-loss order at 133.50, and a take profit at 128. Conservative bears may want to wait for a break of the lower edge of the pattern before going short with a stop at the highs and a take profit at 125.