Analys från DailyFX
EUR/JPY Technical Analysis: From Top to Drop, Now What?
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Talking Points:
- EUR/JPY Technical Strategy: Intermediate-term: mixed, short-term: bearish.
- EUR/JPY has started an aggressive reversal of the prior bullish move as the Japanese Yen has turned-around.
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In our last article, we looked at EUR/JPY showing some indication of ‘topping’ despite its aggressively bullish price action. While the bullish move was developing, there was very little pullback and very mild retracements that made jumping-on the long side a bit of a challenge. But after the pair ‘topped out’, prices have put in a peak-to-trough movement of over 300 pips as bears began to take control.
Chart prepared by James Stanley
For short-term perspectives, this near-term bearish momentum could be hard to ignore, and traders can look to trade bearish trend continuation on shorter time frames, inside of the 4-hour chart, by targeting prior levels of support for the continuation of the down-side move. Such support levels exist at 122.88, 122.50, 121.95, 121.25 and 120.60.
Chart prepared by James Stanley
For intermediate-term and longer-term stances, traders will likely want to wait before pressing the bearish side of the trade, as this move is still very young, and finding an amenable area to manage risk for bigger-picture bearish strategies could be a challenge.
As we had discussed in our last article, the topside move in EUR/JPY had gotten extremely overbought. And while the past two days of bearish price action has seen an aggressive move develop, longer-term, EUR/JPY is still bullish in nature, as we have yet to interact with the 38.2% retracement of the recent bullish move.
This exposes two support areas that could be utilized in the effort of catching support for a bullish swing. Important here is actually waiting for support to develop, as indicated by wicks on the under-side of candles at or around the level itself. The nearer of the two zones is from 121.62-121.95, and the deeper zone straddles the 120.00 psychological level with 119.91-120.32.
Chart prepared by James Stanley
— Written by James Stanley, Strategist 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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