Daily Forex Update: EUR/JPY

The downtrend on the EUR/JPY's daily chart has begun to squeeze into the narrow range of a Falling Wedge pattern. This squeeze is also slowing downtrend momentum (confirmed by Autochartist's two-bar Initial Trend reading), opening up the possibility for reversals on the intraday timeframes. Consequently, the Channel Down pattern on the 240-minute chart may be presenting a reversal buy entry - if, that is, prices can rally through downtrend line resistance at 109.55.

The 111.60 (A) level on the daily chart will likely be an exhaustion level for any intraday rally. This means that, as the Falling Wedge pattern approaches downtrend line resistance, a short-sell entry could be taken - unless, of course, the bulls can carry the EUR/JPY through 111.60 and reverse the pattern.

The 240-minute intraday set-up will allow traders to enter long before the daily chart registers an entry; in this way, the set-up capitalizes on movement within the larger daily pattern. The Channel Down pattern on the 240-minute chart still has an Initial Trend reading of seven bars, indicating a trending environment but not a particularly strong downtrend. This means that, while prices could still stall at downtrend line resistance, should prices continue to slow - and possibly consolidate - a buy accompanied by a Breakout reading of six bars or more would be a strong pattern reversal entry