Analys från DailyFX
USD/JPY Chops in Corrective Fashion; Eyes BOJ Next Week
Talking Points
-BOJ releases monetary statement July 29, traders anticipate stimulus or talk of helicopter money
-Technical structure appears bullish medium term, a break above 107.50 is significant
-If the correction lower continues, support may be found near 104.63, 103.90 or 103.50
Traders are talking about potential helicopter money flying over Japan. Though we don’t know if that will happen, mere talks about it has placed USD/JPY on trader’s radars.
BOJ meets at the end of next week and there is an anticipation of more stimulus arriving out of Japan. Should helicopter money (or other stimulus) be disbursed, it could potentially weaken the Yen and USD/JPY may take flight.
From a technical perspective, the picture is simple. It appears the pair is building a bullish pattern that could lead to much higher prices.
We wrote in our previous article how there is a cluster of resistance in the 106.30-107.30 price zone. If prices were successful in breaking higher and holding, this would be a significant technical development.
Using Elliott Wave analysis, it appears we have 5 waves higher and prices are correcting sideways to lower in 3 waves. This is a bullish sequence that often pre-empts another 5 waves higher of similar size and magnitude as we saw with the July 8 to July 14 increase.
Therefore, a break above the July 20 high of 107.50 could signal a continuation of the uptrend and that the correction is over.
We do think there is a higher probability chance of a move to slightly lower levels. If the correction is still in place, then the wave ‘a’ low of 104.63 is a potential target. Additionally, the 38.2% retracement level of 103.90 is another target. Lastly, we wouldn’t be surprised to see USD/JPY possibly trade down to 103.50. This last zone represents the distance of the ‘b’ wave overshoot in excess of wave ‘v’ and displaces it as a overshoot of the ‘a’ wave low.
How do we know which level is likely to hold?
Though we don’t know if the 107.50 level to the topside or 104.63, 103.90, and 103.50 to the downside will hold, we can use the Grid Sight Indicator to provide an indication of intraday momentum as price presses into one of these levels.
GSI is a big data indicator that compares the current price action to historical patterns and seeks out any matches. Based on those matches it sill share how many of the historical patterns moved higher ‘x’ pips and how many moved lower ‘y’ pips.
In the end, you can see if similar historic patterns produced support or resistance and use that in conjunction with your other analytical tools.
Learn more about GSI or use GSI on USDJPY ‘m3’ or ‘m5’ here.
Bottom line, if medium term technical pattern looks bullish up towards 111-115.
Having trouble trading USD/JPY? This may be why.
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—Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU
Follow me on Twitter at @JWagnerFXTrader .
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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
To be added to Christopher’s e-mail distribution list, please fill out this form
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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