By Kristina Zurla
Chicago, July 2 (BridgeNews) - A technical head-and-shoulders pattern warns a large setback is looming for euro/yen, said David Landi, global head of technical strategy at UBS Warburg.
He said a number of technical factors make this cross a selling opportunity. On a daily closing basis, Japanese candlestick charts show two distinct reversal patterns, heralding a reversal in investor sentiment. A "doji" reversal off the 107.70 high followed by an engulfing pattern confirms a dynamic reversal. Shorter-term or intra-day charts show a nice example of a head-and-shoulders reversal pattern whose neckline at 104.57 is a formidable support area. Landi said compounding the incidence of test and re-test on and around this former resistant new support level, 104.76 also happens to coincide with a 38.2% retracement of the entire rally from 100.00 to 107.70. In sum, he said a break below 104.70 will signal a more extensive decline towards 102.85.
The parameters of Landi's recommendation is as follows:
TARGET STOP Sell euro/yen at 105.75 102.85 106.40
If Landi's trade is triggered and the objective is met at 102.85, the profit would be 2.7% or $2,742 for each $100,000 investment. If the trade is stopped out at 106.40, the loss would equal 0.61%, or $615. The euro/yen cross is traded on the Interbank Market, and the Chicago Mercantile Exchange offers futures contracts on both the euro and the Japanese yen. Invetors interested in tracking progress in Landi's recommendation should use BridgeStation symbol $$eurjpy. Note: BridgeNews takes no responsibility for gains or losses on investments based on this report. The risk in trading can be substantial and investors should fully consider whether such trading is suitable in light of their financial condition.