Analys från DailyFX
USD/JPY: Shock and Some Awe
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Talking Points
- USD/JPY rallies violently into cyclical turn window
- 121.50 – 122.00 is critical resistance
USD/JPY: Shock Awe
The Pi cycle interval from the June 2007 high (8.6 years) in USD/JPY suggested that we might get some fireworks around the BOJ meeting last night. This cyclical “heads up” certainly did not disappoint. As for what it means, going forward the price action over the next few days should prove pretty pivotal and have some important medium-term implications. Generally, into important turn windows like this I am looking for a move to materialize against the short-term trend within one to two days. In this case, that would mean some sort of clear failure against resistance by early next week.
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The zone of key resistance looks to be 121.50 to just above 122.00, which we are testing now. This area marks a convergence of the 200-day moving average, the internal trendline connecting the October 2014 and August 20015 lows and the 61.8% retracement of the June – January decline (among other things). If we are going to get a reversal of importance in this turn window then I would probably expect to get it from somewhere around here. If the zone breaks convincingly, it is certainly possible that it could extend to 6th square root relationship of last week’s low or even the 78.6% retracements of the June – January decline (122.45 122.65) and then fail, but the odds go a lot lower in my book because of the negative technical and psychological damage that such aggressive strength in a short amount of time will have on the market.
The other possible scenario here is that the market does not turn around this window. This would have very obvious positive implications for USD/JPY and signal that the BOJ gambit has worked and that a much more important move higher is indeed underway. New highs after Tuesday would help confirm this.
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— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX
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.
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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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