Recent double tops tell the tale for these two currencies. The EURUSD has a bearish double top in place while the USDJPY has a bullish double top in place. A bit confused? Let's get clarity by viewing the daily charts of each currency.
EURUSD Daily Chart
We can see a double top has formed recently at 1.1055 and is denoted by the lower horizontal line. This is a bearish double top as it is with the trend meaning the double top formation is below the previous swing high level. This double top is extra bearish as it is even below the previous swing low level of 1.1115 which is denoted by the higher horizontal line. Bearish double tops generally mean new lows are on the cards.
The PSAR indicator now has a bearish bias after price busted the dots on the downside.
The MACD indicator is now bearish with the red line above the blue line.
So the probability is for new lows in the EURUSD below 1.0462 while price breaking above this double top level now would be very bullish.
Let's now look at the USDJPY.
USDJPY Daily Chart
We can see a double top has formed in the USDJPY at 122.01 denoted by the higher horizontal line. This is a bullish double top as it is against the trend being above the previous swing high level. These double tops are great for traders that play the expected reaction down but once the reaction is done price generally trades back up and breaks out above the double top formation.
The PSAR indicator now has a bullish bias with the dots underneath price.
The MACD indicator has a bullish bias with the red line below the blue line.
So the probability is for new highs in the USDJPY while breaking down below the previous swing low level now would be very bearish. This level stands at 115.56 and is denoted by the lower horizontal line.
These two currencies, the EURUSD and USDJPY, are both great examples of the two different types of double tops - bearish and bullish, and their significance for price direction going forward.
