Analys från DailyFX
Forgetting Ben (Bernanke) and Trading the Yen Next Week
The reversal in the crowded long equities / short Yen trade influenced larger USD trade in general, especially the USDCHF. The 8 month bullish pattern is at risk of failure if price doesn’t turn up from near current levels. We also must consider a return of ‘risk on / risk off’ trading after the stock market reversal.
USDJPY
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: The USDJPY rally from 90.84 is an ending diagonal (wedge). Such patterns are usually resolved violently and often fully retraced. An outside reversal week on a slightly less than record week of volume (CME volume was slightly less than the week that ended 8/17/07…as of 4pm Eastern Time) is consistent with an important top.
FOREXTrading Strategy: Looking for an early week top. Given how many probably want to take part in a short position, would not be surprised to see more of a ‘battle’ before the break. Would expect resistance at 101.82-101.99 (former support and Thursday close) and sell into that area if reached. A more volatile option of course is the AUDJPY (see below), which reversed from above the 2008 high in April. A month+ of consolidation was broken this week and recent lows at 98.72 and 99.28 form a zone to sell into against 101.00. If the downside plays out, then the objective from the widest point of the recent consolidation yields 94.51. Given the propensity for Yen crosses to overshoot targets, especially on the downside, I’d not be surprised to see the 2/27 low at 92.95.
AUDJPY
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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AUDUSD
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: Thursday’s large volume (CME) proved to be the beginning of short term exhaustion…beginning because the AUDUSD traded down to meet the objective derived from the 1.0624-1.0114 range before reversing sharply. The reversal could be the beginning of a rally (4th wave) into .9840. .9840 is the Tuesday high and underside of the trendline that extends off of the 2011 and 2012 lows AND former channel (red). The parallels between this year and last year remain striking (a low was made last year on 5/23 which led to a 4th wave rally and final low on June 1).
FOREXTrading Strategy: Looking to resell into the underside of the former corrective channel (in red)-the closer to .9840 the better. Understanding though that we are in sharp downtrend and rallies may prove fleeting, would be looking to sell after an up day in general. Breakout systems are warranted as well.
USDCHF
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: Similar to several other USD crosses, notably AUDUSD, some corrective activity may be needed before new USD highs are seen. The topside of the neckline from the completed inverse head and shoulders pattern was tested as support Friday as was the topside of the former corrective channel. The Elliott channel for 4th wave estimation is at .9550 on Monday and .9570 on Tuesday. The latter is in line with the March high (.9566). Weakness below .9520 would negate the 5/14 bullish breakout.
FOREXTrading Strategy: Looking for a low early next week, ideally near .9570. Respect the potential for this entire thing to fall apart too though (use stops!) after CME volume on Wednesday was the highest since 8/9/11…that USDCHF low hasn’t been seen since. Such significant volume figures can indicate exhaustion of the trend.
USDOLLAR
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: A major breakout could be underway from above 10472. Strength above the long term channel suggests acceleration of the rally that began at the 2011 low. However, price has reached the Elliott channel for 5th wave estimation so don’t be surprised to see at least consolidation if not a deeper setback from current levels. Considering that the USDJPY is responsible for most of the rally in recent months, a sharp USDJPY downturn would likely be responsible for most of the weakness too. The topside of the larger channel (blue) is of interest as support if reached. That line is at about 10690 next week.
— Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com
To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele
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Jamie is the author of Sentiment in the Forex Market.
What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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