EUR/JPY's Breakout: The Dance of Corrections and Impulse moves

As EUR/JPY recently breached its all-time high, there was a noticeable surge in trading volume, indicating a potential shift in market direction. Typically, after such a significant milestone, it's common to observe a corrective phase where prices adjust from the extreme levels reached. This correction could manifest as a retracement or consolidation, representing a period of recalibration in the market sentiment.

Following this corrective phase, traders often anticipate an impulse movement, which is characterized by a strong directional move that extends beyond previous highs or lows. This movement signifies renewed conviction in the prevailing trend, supported by fundamental or technical factors.

In simpler terms, imagine EUR/JPY has climbed to its highest level ever, but then it pauses to catch its breath. That's the correction. After this breather, it's like the currency pair gains new energy and starts moving decisively in one direction again—that's the impulse movement. This renewed momentum is often fueled by market participants' confidence in the prevailing trend, propelling prices further in the direction of the breakout.

In summary, the correction serves as a brief pause or adjustment phase, while the subsequent impulse movement reflects a resumption of the underlying trend with newfound strength and momentum.

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