Euro plummets and awaits suckers

The first trade set up I have posted on this blog. I am not going into the fundamentals as you can entertain yourselves with previous entries and we shall stick purely on the technical aspects.

I am a very simple chartist - primarily I like to work off a pressure line i.e,. support becoming resistance and vise versa. I like to focus on mis pricings, the upside or downside surprises based on the economic calendar. But on this entry, we shall determine what EUR/JPY is trying to tell us and whether we can execute a profitable trade.

Firstly we have a very big week in the Chinese markets next week and it would be handy if you keep this somewhere as a reference point as I expect volatility next week by the buckets.

From IFR:

*Markets speculate the PBOC was pre-empting weak data with today's rate cut.
*Heavy data flow beginning week of July 8.
*CPI expected to fall from 3% y/y to 2.3%, PPI exp to drop from -1.4% y/y to -1.9%.
*Exports anticipated to have fallen from y/y rate of 15.3% to 10.2%, GDP exp 7.7% from 8.1%.
*Equity market near 3-year lows cast doubt on whether soft landing can be engineered.
On to EUR/JPY

The above is a 4 HR chart of EUR/JPY. Apart from fundamentals this chart doesn't spell any buy signals to me on the premise of being oversold. On the contrary if you are short, you would book some profits here based on a 14 RSI reading of 10 which is extremely oversold and hedge the remainder for a sucker bounce in case it manifests into a reversal. The bounce will likely be a  sucker bounce providing position is appropriately hedged I would place a limit sell and add to the existing position approximately 3-5 pips outside that support line band in view of becoming resistance at 99.75/80.

Opening fresh trades on Fridays should be immediately eliminated unless booking profits, so the above example is seeking to open a trade Monday/Tuesday. The trend is at best of times very difficult to qualify in ranging markets, but to keep it simpler than simple I implement a 200 moving average and use an above/below rule. So in EUR/JPY instance the bears are in control so you don't want to mess with them.  If our limits are not hit and the instrument continues to plummet, so what. The main fact we have remained disciplined in our approach in order to get involved at the best possible price should be the strategy here.

Good Luck.