Analys från DailyFX
EUR/JPY Technical Analysis: ECB-Weakness a Mere Blip in the Trend
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Talking Points:
- EUR/JPY Technical Strategy: Intermediate-term bullish; near-term price action facing rigid resistance.
- The price action zone from 123.09-124.09 has continually-thwarted price action’s top-side advance for the past two weeks.
- The ECB extension of QE two weeks ago is now showing as a mere blip in recent price action, setting a higher-low and a week later another higher-high. With this trend remaining bullish, even after the ECB drove bearishness into the Euro, traders would likely want to take note that ‘something bigger’ is driving near-term price action (Yen weakness).
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In our last article, we looked at the potential for a new higher-low in EUR/JPY after the European Central Bank extended QE. After this announcement, the Euro was offered-hard across-the-board, but as we noted, the ‘bigger picture’ trend in EUR/JPY has been quite bullish, and traders would likely want to use that short-term weakness to position-in to longer-term bullish strategies.
The level that we pointed out around 120.85 had helped to set support after that ECB-inspired move-lower; after which EUR/JPY ran-up to set a new short-term swing-high at 124.09.
So – to put this in scope – after the European Central Bank extended their QE program, creating weakness in the Euro against most currencies, EUR/JPY merely set a higher-low which then led-in to another higher-high just a week later. This is indicative of a market being driven by a ‘bigger theme,’ and that’s the prospect of continued Yen-weakness as we move into 2017. This is also something that can make top-side continuation, particularly on a longer-term basis, quite attractive.
Current price action is attempting to dig-in support off of a short-term trend-line that can be found by connecting the election-night lows to the low on December 4th. Monday’s price action put in multiple tests of this trend-line and we saw the same this morning; each producing some element of bounce. But this may not be the ‘longer-term’ higher-low that bulls are likely looking for.
Instead, there are two potential levels that could serve such a function: The same price action swing that had shown-up around 120.85 that we looked at in our last article, and a bit deeper around the ‘major’ psychological level at around 120.00. Each of these could be interesting support inflections for longer-term bullish strategies.
Chart prepared by James Stanley
— Written by James Stanley, Analyst for DailyFX.com
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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
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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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