- EUR/JPY is pulling back within a downtrend that has unfolded since the start of November.
- Lower lows are expected assuming a break below the November 22 low.
EUR/JPY establishes a descending sequence of peaks and troughs from the October 31 peak. It is now probably in a short-term downtrend and given it is a principle of technical analysis that trends have a tendency to extend themselves, the odds favor the pair continuing to lower lows.
EUR/JPY 4-hour Chart
The next target to the downside for EUR/JPY is the 158.11 September 30 swing low (red-dashed line). A break below 159.90 (November 22 low) would provide confirmation. The pair has pulled back to the 161.60s and this also provides them with an entry point that might carry less risk and more reward (unless the correction turns into a reversal).
A deeper sell-off could even take EUR/JPY down to 154.00 – 155.00, the August-September lows.
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