Connect with us

Analys från DailyFX

USD/JPY Takes Biggest Plunge in Three Years After Nikkei Bubble Bursts

Published

on

ASIA/EUROPE FOREX NEWS WRAP

After touching its highest level in four and a half years, the USDJPY staged a massive overnight reversal, falling from a high of ¥103.73 on Wednesday to as low as 100.82 in early European trading hours today. In a sell-off that is being credited to the weak Chinese private sector manufacturing report, the Nikkei 225 plunged -7.32%, the single largest drop since October 2008 – the beginning of the end for global equities. However, Japanese Economic Minister Akira Amari said that is normal for equity losses to boost the domestic currency, and that the stock bubble hadn’t yet popped (I think a decline of this magnitude in one session is a mini-bubble bursting); thus Yen losses should be insulated.

Despite the single greatest drop in three years for the USDJPY, the US Dollar overall remains resilient, with the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) retaining some of yesterday’s gains, while holding its ground against the commodity currencies. A lot has been said about the scope of Fed Chairman Ben Bernanke’s comments yesterday – that QE3 would remain in place until data improved, and if it did, then the scale of asset purchase could decline – but to me, it’s more of the same.

Chairman Bernanke reiterated nearly every talking point from the Fed over the past few weeks, including from those in his inner circle, such as NY Fed President William Dudley. As noted yesterday, the Fed’s tone is and remains: ‘the economy is improving, but isn’t great yet; the labor market is steadily moving upwards, but isn’t where it should be for us to withdraw stimulus; disinflation is setting in, but stronger consumption persists; and the payroll tax and ensuing budget sequestration have created quite the fiscal drag.’ I don’t expect any sort of news about a taper at the June meeting (barring a +300K NFP print); any such major shift in policy is likely to occur at the September meeting.

Taking a look at European credit, higher peripheral yields alongside Yen strength has prevented the EURUSD from staging a bigger rally today. The Italian 2-year note yield has increased to 1.320% (+4.4-bps) while the Spanish 2-year note yield has increased to 1.746% (+7.8-bps). Likewise, the Italian 10-year note yield has increased to 3.987% (+8.1-bps) while the Spanish 10-year note yield has increased to 4.228% (+7.0-bps); higher yields imply lower prices.

RELATIVE PERFORMANCE (versus USD): 10:40 GMT

JPY: +1.74%

CHF: +1.07%

CAD: +0.28%

NZD:+0.26%

EUR:+0.19%

GBP:+0.17%

AUD:+0.05%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.47% (+0.46%past 5-days)

ECONOMIC CALENDAR

USDJPY_Takes_Biggest_Plunge_in_Three_Years_After_Nikkei_Bubble_Bursts_body_Picture_1.png, USD/JPY Takes Biggest Plunge in Three Years After Nikkei Bubble Bursts

See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.

TECHNICAL ANALYSIS OUTLOOK

USDJPY_Takes_Biggest_Plunge_in_Three_Years_After_Nikkei_Bubble_Bursts_body_x0000_i1028.png, USD/JPY Takes Biggest Plunge in Three Years After Nikkei Bubble Bursts

EURUSD: Yesterday I said: ”My bearish bias would be negated on a weekly close $1.3000/30 (May 14 swing high and 200-SMA).I prefer selling rallies into 1.2975/3000.” Indeed, 1.2999 marked the top yesterday and although price has been lifted modestly today, there is reason to believe that the next leg of EURUSD weakness is beginning. A close 1.3000/30 remains key for a reversal of bias, and a break of 1.2795/800 would confirm the move towards 1.2750 and 1.2680.

USDJPY_Takes_Biggest_Plunge_in_Three_Years_After_Nikkei_Bubble_Bursts_body_x0000_i1029.png, USD/JPY Takes Biggest Plunge in Three Years After Nikkei Bubble Bursts

USDJPY: We almost got the blowout move yesterday but price was capped by the same trendline that constrained the move above ¥103.00 on Friday, with price topping at 103.73. The reversal cut through the key 101.80 level, leading to a deeper pullback to the 21-EMA at 100.80/90. This level also is ascending trendline support off of the April 2 and April 31 lows, coinciding with the same trend on the daily RSI. A further breakdown eyes a move towards 100.00, then 97.50.

USDJPY_Takes_Biggest_Plunge_in_Three_Years_After_Nikkei_Bubble_Bursts_body_x0000_i1030.png, USD/JPY Takes Biggest Plunge in Three Years After Nikkei Bubble Bursts

GBPUSD: Yesterday I said: “The GBPUSD is back pressuring last week’s lows. With price holding below the $1.5200/20 region I was watching last week, a move towards the early-April lows at 1.5035/75 now eyed….with daily RSI support cracked, the plan is to sell rallies.” Indeed, the lower 1.5035 target was reached, and with the trade stretched to the downside, brief pause allowing the 8-EMA to catch up to current price could occur. I still prefer selling rallies towards the big picture move towards 1.4200.

USDJPY_Takes_Biggest_Plunge_in_Three_Years_After_Nikkei_Bubble_Bursts_body_x0000_i1031.png, USD/JPY Takes Biggest Plunge in Three Years After Nikkei Bubble Bursts

AUDUSD: No change: “The AUDUSD closed below the key 0.9860 level last week, ascending channel support off of the October 2011 and June 2012 lows, as well as the weekly 200-DMA. That is to suggest that a top in the pair back to the July 2011 high at 1.1079 is in place, though I’d prefer for a monthly close below 0.9860/900 for better confirmation. Now, a deeper pullback towards 0.9580 and 0.9380/400 is beginning. In the very near-term, with the weekly RSI at the lowest level since the height of the global financial crisis in the 4Q’08, the AUDUSD is probably close to a point of near-term exhaustion. Rebounds should be sold.”

USDJPY_Takes_Biggest_Plunge_in_Three_Years_After_Nikkei_Bubble_Bursts_body_x0000_i1032.png, USD/JPY Takes Biggest Plunge in Three Years After Nikkei Bubble Bursts

SP 500: No change as the intraweek Bull Flag broke to the upside and hit top rail resistance at 1665 on Friday: “The headline index remains strong although there is some theoretical resistance coming up (this is unchartered territory, so forecasting price relies heavily on valuations, mathematical relationship, and pattern analysis)…It’s hard to be bearish risk right now, but it is worth noting that the divergence between price and RSI continues, suggesting that few new hands are coming into the market to support price (recent volume figures would agree).” Channel resistance from mid-April comes in at 1670, while support is at 1648 (8-EMA) and 1642 (steep channel support).

USDJPY_Takes_Biggest_Plunge_in_Three_Years_After_Nikkei_Bubble_Bursts_body_x0000_i1033.png, USD/JPY Takes Biggest Plunge in Three Years After Nikkei Bubble Bursts

GOLD: No change: “If the US Dollar turns around, however (as many of the techs are starting to point to), then Gold will have a difficult gaining momentum higher. Indeed this has been the case, with Gold failing to reclaim the 61.8% Fibonacci retracement of the April meltdown at $1487.65, only peaking above it by 35 cents for a moment a few weeks ago.” Price is back under 1400, and if US yields keep firming, a return to the lows at 1321.59 shouldn’t be ruled out.

— Written by Christopher Vecchio, Currency Analyst

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

Analys från DailyFX

EURUSD Weekly Technical Analysis: New Month, More Weakness

Published

on

By

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

Confidence is essential to successful trading, see this new guide – ’Building Confidence in Trading’.

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

EURUSD Weekly Technical Analysis: New Month, More Weakness

—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.

Continue Reading

Analys från DailyFX

Euro Bias Mixed Heading into October, Q4’17

Published

on

By

Euro Bias Mixed Heading into October, Q4'17

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

Continue Reading

Analys från DailyFX

British Pound Reversal Potential Persists Heading into New Quarter

Published

on

By

British Pound Reversal Potential Persists Heading into New Quarter

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

Continue Reading

Trending

Copyright © 2017 Zox News Theme. Theme by MVP Themes, powered by WordPress.