An RSI bullish divergence is forming with EUR/JPY pair at 4H time frame. RSI bullish divergence is rare but easy to spot. It happens when RSI keeps rising while the price is falling. It is expected that the price will increase in the near future as it signifies that fewer and fewer people are willing to sell their positions and that buyers are ready to take over. Just like with any technical indicator, RSI divergence is only talking about probability and not an absolute truth. No one, even the most expert trader can claim with 100% certainty that he absolutely knows where the price is going at any given time.
From my own personal experience trading stocks and forex, RSI Divergence is a very powerful indicator.
Ads
Below is a 4-hour time frame of EUR/JPY as of today April 29, 2020. Zoom the page to see the chart in more detail.
Notice that the price has made a lower low since mid of March 2020 until today while the RSI has made higher highs during the same period. It is possible that we may see a possible reversal soon, at least for the short term.
Looking at previous chart patterns using the same time frame, we can see that EUR/JPY did see previous RSI Bullish Divergence. After a downtrend, RSI divergence was observed and the price rallied up for a few days. If you managed to catch this pattern, you would have made money with a long position of this pair. It happened three times since August 2019. EUR/JPY is also at its multi-year low. The last time it reached this level is April 2017 where it quickly bounced back.
Ads
Now, is this analysis an absolute truth? Of course not… Again we are only dealing with probabilities here. Talking about the same currency pair, some indicators suggest a bearish signal such as the IG Client Sentiment. IG Client Sentiment combines all the positions of retail traders using IG as a broker and combines this data to form an indicator. IG Client Sentiment is a contrarian indicator, so if the majority of retail traders are short then the possible near term trend may go up, and if the majority of retail traders are long then possible near term trend may go down. Check out this simple YouTube as an explanation. Again, just like with any other indicator, this is not absolute and should be used in conjunction with other indicators and analysis (yes, I keep on repeating this phrase for emphasis).
Lastly, watch out for support and resistance levels. If it breaks below 114.928, the next support is between 111.058-112.611 levels. If it manages to hold and stay above 116.323 it may validate this hypothetical reversal. Trade at your own risk.
Update April 30, 2020 – EUR/JPY has indeed gone up by approximately 182 pips.
Get the latest forex analysis by subscribing to this website. We publish not by quantity but the quality of analysis with a high probability of success. We analyze where prices might go and update the same article with the results after a few days. See you in our next forex analysis article!
Forex trading is a legitimate way to earn extra income online. Start trading forex by registering with our trusted broker below.
Advertisement: The broker IC Markets was founded in Sydney, Australia in 2007 and is one of the major forex brokers worldwide. It is regulated by Australian Securities and Investments Commission (ASIC), Australia’s premier regulations body for financial services, consumer credit activities of banks, credit unions, finance companies. ASIC also regulates financial markets making sure they operate with fairness and transparency.
IC Markets has competitive spreads, attractive rebate programs, excellent customer service, and is compatible with MT4, MT5, and cTrader accounts. It satisfies all the necessary considerations when choosing your forex broker. Click here to learn more about IC Markets.
