Analys från DailyFX
A Very Selective Short Opportunity in AUD/JPY
Talking Points:
- ”Suspicious” Downtrend in AUD/JPY
- Consolidation Following Recent Gap Down
- How to Mitigate Risk When Shorting AUD/JPY
Markets have been left largely in disarray with weekend gaps further muddying the waters after a very fast-paced Friday session. As a result, today’s trades are likely to be lower probability in nature, and there are no clear shots to be taken on any of the hourly charts. Nonetheless, AUDJPY may present a short opportunity later in the trading day on the 15-minute chart.
The four-hour chart of AUDJPY (see below) shows a somewhat suspicious downtrend in progress. It is worrisome because of a relatively sharp rise on the daily chart of late, which suggests choppy price motion ahead. Nonetheless, this trend should prove sufficiently robust to support a 15-minute trade.
Guest Commentary: Apparent Downtrend in AUD/JPY
On the below hourly chart, price has been consolidating sideways ever since the gap down, and AUDJPY could well try to close the gap in early-Monday trading before continuing down. Should this happen, resistance in the form of the declining trend line will be met. This, in conjunction with several horizontal levels, gives a resistance zone between 90.79 and 91.04.
Guest Commentary: Gap in Play on Hourly Chart of AUD/JPY
This zone is merely 25 pips deep, which represents extremely small pip risk. That’s appropriate for a day where choppiness is likely to reign. Conservative traders might even be well-advised to take half the usual risk in calculating a position size.
Nonetheless, the best entry for this trade is on the 15-minute chart (see below).
Traders will readily note the choppy price action on this time frame, and some may fear that AUDJPY may even fail to rise as far as the key overhead resistance zone. However, it is far preferable to be unable to trade in this environment than to set a resistance zone that is too close to price and can easily be stopped out.
Guest Commentary: The Ideal Time Frame for Selling AUD/JPY
If AUDJPY does manage to reach the designated area, two or three attempts can be made to get in on a short trade, which will have nearly 75 pips to run (or perhaps even more, depending on the trigger) just to reach the previous low. This will provide decent risk profile and sufficient justification for taking the trade.
Viable trade triggers would include the usual suspects: pin bars, bearish engulfing patterns, or bearish reversal divergence on the 15-minute chart of AUDJPY.
By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com
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
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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