Analys från DailyFX
Could USD/JPY and Gold Fall Together?
After numerous false starts on the downside, beginning with the 2/25 collapse, USDJPY traders are conditioned to buy the dip. Eventually, this mentality will aid in accelerating a nasty decline.
USDJPY
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREX Analysis: In the most recent weekly, I noted that “the USDJPY has responded to the 50% retracement of the decline from the 2007 high.” The USDJPY responded to the same level this week. Only in a paradoxical world like markets would the USDJPY reverse before 100.00 and the major 101.26/67 area. Those levels are still possible of course but the close below the diagonal support line is an early sign that something else may be going on. After numerous false starts on the downside, beginning with the 2/25 collapse, traders are conditioned to buy the dip. Eventually, this mentality will aid in accelerating a nasty decline, but within a multiyear uptrend. So is this the beginning of the ‘nasty decline’? I think so but I know that I don’t want to be long when it happens. Consider also that a seasonally weak period for equities is upon us.
There are a lot of levels to get through before one can be confident that a larger drop is underway. A drop below the 4/16 low at 95.65 and line parallel to the one that extends off of the 3/12 and 4/11 highs would be concrete evidence that something bigger is brewing on the downside. Candlestick traders will notice a bearish engulfing pattern on the weekly. The action is telling. The previous week’s close was the highest in almost exactly 3 years. Price opened above last week’s high and closed below last week’s open. Although far too early for most to consider, it’s worth noting the line that extends off of the 1998 and 2002 tops. That line could once again come into play, this time as support, as it did in 2007.
The USDOLLAR (2 charts down), which I term USDJPY light, is also showing signs of cracking. Price closed beneath the extremely well-defined Elliott channel. The high (on the 24th) crossed through the line that extends off of the 2011 (October 11) and 2012 (June 1) highs.
FOREX Trading Strategy: I’ll be focusing on chart levels below if reached. The underside of the broken diagonal support line is now estimated resistance. That line is at about 98.65 on Monday. 98.45-99.00 is viewed as resistance. It’s probably too early to consider an automated breakout strategy. Markets tend to trade sharply in both directions before the ‘straight line’ move gets underway.
USDJPY
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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USDOLLAR
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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Gold
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: After nearly retracing the entire 4/15 decline, gold reversed at the downward sloping line that connects the record high and February 2012 high (2/29/12 was a $105 down day high to low). That line provided support in late August 2012 (8/31/12 was $47 up day high to low) as well. If gold is headed lower over the next few weeks then it needs to stay below this line. Strength above would shift focus to the December 2011 low at 1522.
FOREX Trading Strategy: Short against 1500, for a new low, specifically the 2011 low at 1307.
— Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com
To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele
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Jamie is the author of Sentiment in the Forex Market.
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
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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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