Today I want to discuss two scenarios for eur/jpy and gbp/jpy pairs for the nearest future. It is obvious that the two have been in a very strong uptrend since middle of November. From that time on both pairs have formed a number of bullish patterns that indicated continuation of trend and it did continue. I do believe we are at crossroads for Japanese Yen pairs. And I understand that the future direction of the pairs is 50 bullish and 50 bearish.
Firstly, on the bullish side we may see continuation patterns formed again. If you look at gbp/jpy pair you might spot a bullish flag in formation. This might indicate higher prices in the pair. Resistance and the third point for the upper side would be at 1.4310. If that broken we would probably see 144.75 (top) taken out sooner rather than later. This would take a while, but as you can see current swings in the pair are pretty wild and we should not reject the idea of those targets to be reached this week.
On the other hand, if you looked at daily charts you would see another possible bearish pattern in development – head and shoulders. The right shoulder has not developed yet, but it can definitely happen this week. This would mean a break lower and a possible target for that would be 136.00. Tomorrow we have BOE minutes coming out and that should give us more insight as to which scenario is most probable for gbp/jpy.
As gbp/jpy and eur/jpy move in tandem I am convinced that whatever happens to gbp/jpy will also happen to eur/jpy. Correlation is not one hundred percent, but it is very high. I do not see a bullish chart pattern on eur/jpy, but I do see bullish candles near the current support 117.30-60 on hourly charts indicating that the pair has bumped into serious support and buyers started coming in. On the other hand, there could be bearish head and shoulders pattern in development. There should be right shoulder formed in order for this to come true. The price has to go back to 120.00 area and reverse from there for that to come true. Then prices could fall as low as 113.50 and that could happen very fast.
So, these are bullish and bearish scenarios for gbp/jpy and eur/jpy pairs.